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‘Netscape Moment’ Won’t Come From Solyndra, At Least Not Yet

Posted in Board Of Intellectual Capital, tagged , , , , on June 23, 2010| Leave a Comment »

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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Shares of Motricity slip in market debut and other tough IPO news

Posted in Uncategorized, tagged , , , , on June 22, 2010| Leave a Comment »

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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Tech firms making S.F. new home

Posted in Board Of Intellectual Capital, Community, Economy, internet, Investments, Market research, mobile 2.0, Social Networks, Technology, Web 2.0, Wireless 2.0, tagged , , , , , , , , , , , , , , , on June 21, 2010| Leave a Comment »

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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Fannie-Freddie Fix at $160 Billion With $1 Trillion Worst Case

Posted in Board Of Intellectual Capital, boic, Economy, tagged , , , , , , , on June 18, 2010| Leave a Comment »

Here is a good article from Bloomberg.

“The cost of fixing Fannie Mae and Freddie Mac, the mortgage companies that last year bought or guaranteed three-quarters of all U.S. home loans, will be at least $160 billion and could grow to as much as $1 trillion after the biggest bailout in American history.

Fannie and Freddie, now 80 percent owned by U.S. taxpayers, already have drawn $145 billion from an unlimited line of government credit granted to ensure that home buyers can get loans while the private housing-finance industry is moribund. That surpasses the amount spent on rescues of American International Group Inc., General Motors Co. or Citigroup Inc., which have begun repaying their debts.

“It is the mother of all bailouts,” said Edward Pinto, a former chief credit officer at Fannie Mae, who is now a consultant to the mortgage-finance industry.

Fannie, based in Washington, and Freddie in McLean, Virginia, own or guarantee 53 percent of the nation’s $10.7 trillion in residential mortgages, according to a June 10 Federal Reserve report. Millions of bad loans issued during the housing bubble remain on their books, and delinquencies continue to rise. How deep in the hole Fannie and Freddie go depends on unemployment, interest rates and other drivers of home prices, according to the companies and economists who study them.

‘Worst-Case Scenario’

The Congressional Budget Office calculated in August 2009 that the companies would need $389 billion in federal subsidies through 2019, based on assumptions about delinquency rates of loans in their securities pools. The White House’s Office of Management and Budget estimated in February that aid could total as little as $160 billion if the economy strengthens.

If housing prices drop further, the companies may need more. Barclays Capital Inc. analysts put the price tag as high as $500 billion in a December report on mortgage-backed securities, assuming home prices decline another 20 percent and default rates triple.

Sean Egan, president of Egan-Jones Ratings Co. in Haverford, Pennsylvania, said that a 20 percent loss on the companies’ loans and guarantees, along the lines of other large market players such as Countrywide Financial Corp., now owned by Bank of America Corp., could cause even more damage.

“One trillion dollars is a reasonable worst-case scenario for the companies,” said Egan, whose firm warned customers away from municipal bond insurers in 2002 and downgraded Enron Corp. a month before its 2001 collapse.

Unfinished Business

A 20 percent decline in housing prices is possible, said David Rosenberg, chief economist for Gluskin Sheff & Associates Inc. in Toronto. Rosenberg, whose forecasts are more pessimistic than those of other economists, predicts a 15 percent drop.

“Worst case is probably 25 percent,” he said.

The median price of a home in the U.S. was $173,100 in April, down 25 percent from the July 2006 peak, according to the National Association of Realtors.

Fannie and Freddie are deeply wired into the U.S. and global financial systems. Figuring out how to stanch the losses and turn them into sustainable businesses is the biggest piece of unfinished business as Congress negotiates a Wall Street overhaul that could reach President Barack Obama’s desk by July.

Neither political party wants to risk damaging the mortgage market, said Douglas Holtz-Eakin, a former director of the Congressional Budget Office and White House economic adviser under President George W. Bush.

“Republicans and Democrats love putting Americans in houses, and there’s no getting around that,” Holtz-Eakin said.

‘Safest Place’

With no solution in sight, the companies may need billions of dollars from the Treasury Department each quarter. The alternative — cutting the federal lifeline and letting the companies default on their debts — would produce global economic tremors akin to the U.S. decision to go off the gold standard in the 1930s, said Robert J. Shiller, a professor of economics at Yale University in New Haven, Connecticut, who helped create the S&P/Case-Shiller indexes of property values.

“People all over the world think, ‘Where is the safest place I could possibly put my money?’ and that’s the U.S.,” Shiller said in an interview. “We can’t let Fannie and Freddie go. We have to stand up for them.”

Congress created the Federal National Mortgage Association, known as Fannie Mae, in 1938 to expand home ownership by buying mortgages from banks and other lenders and bundling them into bonds for investors. It set up the Federal Home Loan Mortgage Corp., Freddie Mac, in 1970 to compete with Fannie.”

Read the full article here.

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The New Blueprint for Successful VC Funding

Posted in Board Of Intellectual Capital, Economy, Gerbsman Partners, internet, Investments, Market research, Strategy, Technology, Venture Capital, tagged , , , , , , , , , , , , , , , , on June 11, 2010| Leave a Comment »

Here is a good read from Yahoo.

“Jeffrey Bussgang likes crazy entrepreneurs. Twitter’s Jack Dorsey, LinkedIn’s Reid Hoffman and Sitrris Pharmaceuticals’ Dr. Christoph Westphal all share what Bussgang, a partner with Boston-based Flybridge Capital Partners, calls paranoid optimism. He defines it as an almost-arrogant belief in a world-changing idea mixed with a healthy fear of competitors. “You rarely see those two words together, which is why I like them,” Bussgang says. “They really distill the essence of the great entrepreneurs.”

He should know. Before he was a venture capitalist, Bussgang co-founded Upromise, now part of Sallie Mae and the nation’s largest private source of college funding contributions. In his new book, Mastering the VC Game, Bussgang offers a blueprint for entrepreneurs hoping to get funded: Be a paranoid optimist.

But even that may not be enough, given the state of today’s venture capital market. Total VC dollars invested fell 39 percent between the first quarter of 2008, before the recession began, and the first three months of 2010, according to data supplied by PricewaterhouseCoopers and the National Venture Capital Association.

VC firms have gone tight-fisted, and limited partners–the investors who supply capital to private equity funds–are skittish, afraid of being burned again after suffering a decade of negative returns. Mix in a contentious debate over the taxability of profits derived from successful venture capital investments, otherwise known as carried interest, and entrepreneurs are being forced to clear hurdles not seen since the 1980s, says Roger Novak, a partner with Novak Biddle Venture Partners in Bethesda, Md. “I think we’re going back to the old days, and better companies are going to be born.”

In other words, venture capitalists are being more discerning about where and with whom they invest. Here are three ways to make sure your business passes the sniff test.

  1. Create the Market
    Much of that time was spent planning and talking with prospects; the founders didn’t want to build a solution before defining the problem, which they believed was big. Advertising affiliate networks were losing revenue each time a customer clicked on a digital ad but completed the transaction by phone. RingRevenue would fill the gap with technology, but only if affiliates could agree on the concept they had in mind.

    “Before we were going to commit all of our time, career, dollars and resources to it, it was important to [know] enough about the customers and their needs that we could feel good that we were getting it right the first time,” Spievak says.

    Each meeting brought changes to the design. But by asking prospective customers for feedback and then building to spec, RingRevenue created its own market. “We wanted to make sure that we understood the formula for growth, that we had satisfied customers and a scalable model,” Spievak says. Investors were impressed. RingRevenue closed a $3.5 million initial round of venture capital funding in June of 2009.

  2. Get a Big Idea
    If there’s a model for the sort of crazy entrepreneurs Bussgang admires, it might be the team at PhoneHalo. The company’s wireless technology plugs into a smartphone, making it a hub for preventing computers, iPads and other networked equipment from getting lost or left behind. But the vision for what it could be is much bigger.

    “Imagine that everything that’s valuable to you in your life is always connected to the network. And imagine down the road if every item in your refrigerator was somehow talking to the network so when you were low on milk, if it goes through PhoneHalo’s infrastructure, it can update a to-do list right as you’re in the grocery store, all on the fly,” says CEO Jacques Habra. Crazy? Sure, but according to Bussgang, the ability to press forth in the face of naysayers is what makes a great entrepreneur.

    PhoneHalo was still shopping for venture capital funding as of this writing. And yet Habra and co-founders Christian Smith and Chris Herbert are confident they’ll eventually find the right VC partner.

    “Since this is our baby, it’s easy to feel rejected and bruised by a no,” Habra says. “In reality, that time with an investor is hugely valuable: If you ask the right questions and apply the feedback to your business unemotionally, you make the company that much more investable and likely to succeed.”

  3. Work Your Network
    Finally, the venture capitalist who doesn’t know you isn’t likely to partner with you. “They see so many referred-in deals that it just doesn’t make sense for them to spend much time on the ones that come in over the transom,” says Spievak.

    He and his team were approached by potential venture capital investors in late 2008, during the height of a global financial meltdown, in part because backers of his earlier venture, publicly traded CallWave, earned back 30 times their investment following a 2004 public offering.”

Read more here.

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