VentureBeat

Here’s a summary of the latest action. See below for more:
1) Sour grapes for Parakey investors; they get no Facebook stock
2) Facebook facing legal trouble back East, this time for child-safety issues
3) Amazon launches Amazon MP3, a competitor to iTunes
4) Private equity firm Veronis Suhler Stevenson buys Vault.com

Parakey’s investors saw their money doubled when Facebook acquired, but got no stock — We’ve talked several insiders about the deal, and they confirm that Parakey (see our coverage of the company) was sold to Facebook for less than $4 million in cash, basically doubling the return for investors such as O’Reilly AlphaTech Ventures, MSD Capital, YCombinator, Thomvest, Paul Buchheit, Ron Conway and Warren Zide. On the one hand, that’s small win in VC terms. Most VCs sprinkle bets on many companies, hoping one company will get a huge hit, and they had hopes for Parakey. Techcrunch’s report asks whether investors were “left in the cold,” citing unnamed sources saying that Parakey founders Blake Ross and Joe Hewitt made off with a nice dollop of Facebook shares for their compensation. Facebook shares are desirable, because they’re expected to grow significantly in value. However, the people we talked with suggest that’s sour grapes, and offer a different story. One investor admitted he was somewhat disappointed (”everyone hopes for a good return,” he said). However, he added that the return size really wasn’t that big of an issue for him. Rather, he was more keen to see the Parakey project live on. Parakey had an interesting technology, though he worried it wouldn’t see the light of day. Hewitt, for example, is now working on Facebook’s iPhone. Another insider pointed out the deal’s 2x return was rendered in six months for most investors, which isn’t bad at all (Sequoia Capital, a firm that invested much earlier, may have gotten a slightly better deal, though we haven’t confirmed this). We’re told most investors didn’t spend that much time on the company, either. [Update: Ron Conway, another investor, just got back to us: "I'm not disgruntled" he said. "2x in 6 months isn't too bad. I'm happy for the founders."]

Facebook facing legal trouble back East, this time for child-safety issues — Undercover investigators from the New York attorney general Andrew Cuomo’s office set up fake Facebook profiles posing as minors, found pornographic images and videos, and were repeatedly solicited by adult sexual predators. The office announced a full investigation yesterday, saying that Facebook’s safety features and its responses to complaints did not adequately address the issues.

True, the company is in hyper-growth mode, averaging 200,000 new users per day since January, and now has more than 42 million active users.

Still, being busy is no excuse for dealing with the exposure of children to pedophiles or others asking them for nude pics. Myspace has been in the spotlight for this problem for years, which Facebook managed to mostly avoid it while its core user base was college students. “If you wanted to stalk a young girl on Facebook, it would be very, very easy,” Myspace owner Rupert Murdoch said at a conference last week.

Facebook might want to check out Keibi, a newly-launched software service designed specifically to help social networks’ customer service teams find and delete porn faster. Facebook isn’t new to legal cases: Add this latest to the Massachusetts court case brought against Facebook by rival ConnectU, which claims that it invented online social networking on college campuses. And Facebook has been criticized for moving too slowly to address other sensitive issues, such dealing with its anti-Islam group.

Amazon launches Amazon MP3, a competitor to iTunes – Techmeme has more.

Private equity firm Veronis Suhler Stevenson buys Vault.com – Vault.com provides surveys and other career information for a range of professional industries: investment banking, consulting, law, government, media and others. The majority-stake investment values the company at between $60 and $85 million, the Wall Street Journal reports.

updated

Facebook has acquired Parakey, a Mountain View, Calif., startup that had been working on a new way for people to work seamlessly on applications while online and offline.

Founded by former Mozilla Firefox browser developers Blake Ross and Joe Hewitt, Parakey had worked in secrecy for two years on a project it hoped would make online life much less complex for regular people. They called their PC download “a personal operating system.”

Notably, Parakey is Facebook’s first acquisition. Financial terms of the transaction were not released.

We wrote about Parakey here, based on an early description of the company’s plans to Spectrum. It was backed with seed funding from Sequoia Capital, O’Reilly AlphaTech Ventures, MSD Capital, YCombinator, Thomvest, Paul Buchheit, Ron Conway and Warren Zide (see Blake Ross’ post).

Here’s how we described it:

It turns your computer in a hybrid Web site-hard drive, where you can choose what to make public online and what to keep private. Everything else is seamless between the Web and your desktop, letting you avoid the hassles that come with downloading photos, for example, and putting them up on the Web.

…Even though Parakey works inside your Web browser, it runs locally on your home computer, which allows Parakey developers to do things inside your Parakey site that a traditional Web site could not do, such as interact with your camera.…Everything you encounter while surfing — online photos, videos, tunes — you can drag right onto your Parakey page, end of story. …you can manage your content quickly and efficiently, even if you’re off-line.

Notably, however, Adobe, Microsoft and others have released their own technologies tho help developers bridge the gap between online applications and the desktop. Given Parakey’s secrecy, its difficult to tell how much its software has been duplicated by these other frameworks. However, reading the Spectrum piece, now many months old, you get the feeling Parakey has gone fairly deep.

Ross and Hewitt have joined Facebook as part of the acquisition, Facebook said in a statement. They’ll work to develop the Facebook developer platform, which has become a popular place for third-party developers to show case their applications for Facebook’s 30 million users.

Ross and Hewitt are best known as the co-founders of Firefox, downloaded more than 300 million times. Hewitt also built a popular web development tool called Firebug.

Update: Here’s more description, from (Parakey investor) O’Reilly’s blog:

The platform, written in Python, C++ and JavaScript, offers a means of building applications that merge the best of the desktop and the Web. Like desktop apps, these apps work offline, offer more privacy than pure websites, run quickly, and integrate with the system. But like Web apps, they are also more creative, visually alluring, accessible from anywhere and potentially accessible by anyone. In short, Parakey apps are designed to be both useful and social, a combination that is too rare today….What separates Parakey from others in this space is that we’re building not just the platform but also the first set of applications on top of it….

Update: Ross has an early notable observation about Facebook, “From what I’ve seen so far, it is truly amazing. For instance, all the data is stored in a sqlite database that runs on Mark’s iPhone.”

That’s what Rolling Stone wants you to believe, in its latest edition. In a story called “Baby Billionaires of Silicon Valley,” Rolling Stone catches up with a group nine entrepreneurs who get together to strategize. This is another hype job, since none of these people are billionaires. (Update: Blake Ross, in comment below, says this is no secret society, and headline is wrong.)

From the piece:

That’s why they’ve gathered here tonight. This is one of the first meetings of a secret society they formed and jokingly called the Young Guns; a more apt moniker might be the Valley Brats. It’s an invite-only cabal of the most powerful under-thirty-year-old mavericks in town. Every few weeks they gather to drink, plot global domination, make friends and, mainly, just act their age. “We got sick of hanging out with older guys,” says the Brats’ gregarious founder, Rob Pazornik, twenty-six-year-old creator of an online shopping startup called LicketyShip. “All they talk about is mortgages and nannies. It’s like hanging out with your dad’s friends.”

Featured in the cover photo, from left to right: Blake Ross (formerly Firefox, now Parakey), Mark Zuckerberg (Facebook), Matt Sanchez (VideoEgg), Robert Pazornik (LicketyShip), Seth Sternberg (Meebo), Todd Masonis (Plaxo). Also featured are Chad Hurley & Steve Chen (YouTube), and Bram Cohen (BitTorrent).