When M&A and IPOs are up, who needs to make money?

The market for M&As and IPOs is strongly up, which is good for Silicon Valley venture capitalists, who can use those transactions to make money off their investments. That’s all good, because it helps fuel optimism, and means more money for promising entrepreneurs down the road. Here’s a table that shows how 2004 was the strongest year since 2000.

A blog tool to fence in your children

WaveMarket has just landed $9.4 million in venture capital to take blogging tools to the next frontier: Allowing your friends and relatives to see where you’re blogging from, giving them a map of where you are, and even creating alerts when you arrive somewhere. The company boasts it can create protective “geofences” around children — notifying their parents if their kids stroll out of a certain limited area.

Orb Networks a good start

Our colleague Mike Langberg today takes an even-handed look at Orb Networks, the Emeryville start-up that claims it can connect you to your music, video and other files wirelessly, via any device. Turns out Orb is a good start, but isn’t quite ready for most potential customers. It’s just the latest example of a Silicon Valley start-up going after what some have summed up as the “digital living environment,” a broad term that is more accurate than the much-maligned “digital living room”. Maligned, because much of the living room is now accessible from outside the home. Morgenthaler Ventures led a $4 million investment into Orb Networks, just one in a string of companies Morgenthaler’s partner Gary Little has pumped money into as part of the firm’s initiative to target such personal technology. Others he’s invested in are the file-sharing company SNOCAP, and the stealth file-sharing company imeem.

Epinions saga continues

Wow, what a dog’s breakfast this Epinions suit is. Private Equity Week, in its story on the latest developments in the case, says that “Naval Ravikant is learning the hard way that the venture industry doesn’t take long to close ranks,” and the story suggests that’s certainly the case. He’s even been booted from the VC firm, Dot Edu Ventures. (Thanks, Dan, for the link)

Hate to spoil the Google party, but…

As we’ve argued before, the “PE ratio” is the granddaddy of all yardsticks used to measure the stock market’s value. It measures the price of a stock for every dollar of annual earnings, or profits, per share of the company. A PE of 100 means that investors are willing to pay $100 for every dollar per share of profits made by a company.

Is VC money going abroad?

Venture capital firms are still raising large amounts of money from their investors, but data about their actual investments in U.S. start-ups is showing anemic growth at best. Here are our recent stories (here and here)

The Geo-Green alternative

We’ve been writing about clean technology for a while now, but we haven’t articulated how Silicon Valley’s possible contributions to new energy sources can directly help foster world peace. Thomas Friedman, in today’s NYT, outlines an interesting argument along these lines. Not everyone will agree, and some environmentalists will take issue with his endorsement of nuclear power (which critics say creates a huge radioactive waste problem, sucks up subsidies, is more expensive than the industry sometimes owns up to, and leads to verification problems precisely in prickly places like Iran). Yet it’s worth mulling over. Of course, only a tiny fraction of the Silicon Valley’s venture capital investments are earmarked for energy related technologies, perhaps a sign of the limits to how much technology can produce alternative energy sources. Still, even if the opportunities are few, they are potentially huge.

More on clean tech in Silicon Valley

San Jose’s chip company Cypress Semiconductor, run by the outspoken Mr. T.J. Rodgers, has taken a hit recently, as demand for its chips has fallen, forcing layoffs. The good news is Cypress has put its semiconductor expertise to work in a whole new sector, solar power. Its solar cell subsidiary, SunPower, recently announced it was doubling production capacity, and customers and analysts are saying good things about it. We’ve written about Rodgers’ unsentimental reasons (see link to Mercury News story) for the investments (it’s purely a capitalist endeavor), but it’s a feel-good story nevertheless.

Razzed by PhoneBites

San Francisco start-up PhoneBites, a company that allows people to “razz” others by injecting sound clips into their phone conversations, said last week it has raised a first round of $3 million in financing.

Epinions founders sue Benchmark, August et al.

Three of Epinions’ five founders filed suit Jan 19 in San Francisco Superior Court against Silicon Valley venture capital firms Benchmark Capital and August Capital, alleging the firms conspired with fellow founder Nirav Tolia to deprive them and other employees of nearly $40 million. Here’s a copy of the complaint, filled with intrigue.

Venture investments lowest in 7 years. Really?

Can the latest VC report — see our story here — really be true? Silicon Valley venture capitalists invested less in the fourth quarter of last year than they did in any quarter over the past seven years, according to a study by VentureOne and Ernst & Young. Most people we’ve talked with in Silicon Valley’s entrepreneur community swear activity has picked up, so we raise some questions about the data in the story. Here are three other reasons to believe any dip, if it happened at all, is a temporary aberration — items that we didn’t mention in today’s Merc story.

Silicon Valley's engine chugs on

Here’s another example of what makes this place so dynamic. Stanford scientist, KJ Cho, developed a great nanotechnology method, but didn’t know how to make a business out of it. He meets a veteran like Bill Miller, who helps him throw a business plan together — and within 18 months, the new company, Nanostellar, has gotten $3 million in venture backing and already cranked out a prototype for a new catalytic converter that aims to undercut prices of existing models, and help save the environment too. Worst case, it may end up one of the nine of ten start-ups that eventually fail — but hey, better the idea is given a chance to fly than to let it die in the labs.

The wiki wars

Palo Alto wiki company JotSpot leaked news today that it had signed up Walt Disney as a paying customer, stealing it away from its Palo Alto competitor, Socialtext. Disney is JotSpot’s first major customer. Though Socialtext’s Ross Mayfield doesn’t seem fazed.

Tech magazines are back; Forrester latest entrant

Yep, there’s five of them, and we write about their aspirations in our Mercury News story today, “Tech mags return — can they survive?” (Or here, if you haven’t registered and can’t be bothered.) The overriding theme is, you’ve got to have a “niche,” or else. As usual, print constraints meant we couldn’t get everything in. Here are some more thoughts:

BusinessWeek launches VC/start-up blog

We welcome Justin Hibbard and Sarah Lacy, who “cover tech venture capital for BusinessWeek” as the latest mainstream media folks to join the blogging world, here. Similar to our own, though they’re apparently more nationally focused — relative to our own Silicon Valley myopia.

IPO in three years, no revenue

Here’s the latest Silicon Valley company to file for an initial public offering despite having no source of revenue. It’s a biotech company, so we’ve been here before, and ibankers seem ready to extend the tradition.

Silicon Valley's contribution to energy problem

Here’s a link to our story that ran in yesterday’s Mercury News about how Silicon Valley is turning to the challenge of finding alternative energy sources. The headline omits the more sobering subtitle carried in the print version: “…but sector offers little home-run potential and new ideas are still few and far between.”

VCs and blogs

Interesting discussion today over at the Venture Capital Journal corner, about the trend of VC blogging. Lawrence Aragon writes a provocative piece here (apparently available free until 2pm PST), suggesting more VCs will need to consider blogging, to develop their relationships.

How much can you say, part II

We wrote a couple of weeks ago about the increasing trend among companies and venture firms to announce their plans to raise private money via news stories, including at VentureWire. We asked a couple of well-known attorneys then whether this might infringe upon SEC rules that prohibit general solicitation, and they said the announcements appeared to do so — though they were careful to add that each announcement needs to be looked at case by case.

Plaxo gets new CEO

Plaxo, the Mountain View online contact updating service that has fascinated some users but turned off others because of its privacy implications, today announced a new CEO. Ben Golub, previously the senior vice president of marketing and corporate affairs at VeriSign, gets the position. Here’s the release: Download file

Happy Holidays

Our musings will be scant over the next few days. We’ll resume in earnest early next year. In the spirit of holiday reflection, though, we’re recapping below some the themes followed over the past year — we’d welcome your thoughts about any or all of them, especially on how you think they’ll develop over the next year. We’ve been challenged and inspired by your contributions in 2004, and we look forward to more of them.

Sequoia hooks up with dating site eHarmony

The competitive tension between Silicon Valley’s two leading venture firms rose today, upon the announcement (see LA Times story, may require registration) that Sequoia Capital is helping pump nearly $110 million into online dating site eHarmony. The valley’s other top-dog venture firm, Kleiner Perkins Caufield & Byers, has backed Sunnyvale’s Friendster, one of the leading social networking sites for dating.

Venture capital not for the weak of heart

Santa Clara’s Applied Materials has closed its venture capital arm, with apparently no explanation other than the filing it made to the SEC recently (wording contained in extended entry below). It’s the latest sign of how corporate venture efforts are the first to shut down when times get tough, and how venture capital firms committed over the long term (typically with individual funds lasting ten years) are better suited for the duration. The background, of course, is that Applied Materials last month said it expects first-quarter orders to drop 35 percent, amid a lull in the semiconductor industry.

How much can you say when you raise private money?

Over the past year, it seems, more and more start-ups, venture capital firms and other types of private investment funds have been announcing publicly that they’re looking to raise money. Maybe we’re missing something here, but we thought that security laws forbid you from publicly soliciting funds — a way of protecting unsophisticated investors from being duped.

Savage beasts and bizarre IPOs

Silicon Valley is so surreal sometimes, it drives us out of bed in the morning without need of coffee. Our Mercury News carries pages of daily business news, but there’s no way it can cover all the quirky stuff going on here. Two items that made us stroke our virtual beard today, courtesy of VentureWire:

California mulling legislation to keep VC info secret

We’re just wondering what took them so long. Turns out, state leaders, led by the Regents of the University of California, are discussing legislation to placate venture capitalists upset by the disclosure of some of their secret info. UC and other state pension funds have irked venture capitalists by disclosing sensitive information like fees they pay to the venture firms to manage state pension and endowment monies, and their financial performance results.