VentureBeat

Updated

John Doerr and Michael Moritz, the most prominent venture capitalists in the world, just squared off at the annual meeting of the National Venture Capital Association. Largely on the basis of their investments in Google, the two men have spent the last few years jockeying for the top spot on Forbes’ annual Midas List — Moritz (pictured, below) topped the list in 2007, with Doerr (pictured, above) at number two, but this year, their positions were reversed. For all their success, the VCs — described in the program booklet as “the titans” — were genial and even sounded rather humble while sharing the stage together.

Doerr, for example, emphasized his vision of venture capital firms as service organizations for entrepreneurs. They’re trying to help entrepreneurs realize their dreams, which is one reasons why Doerr says he abhors trivializing their work by calling investments “deals”. (Moritz agreed, but said it’s even worse to refer to a company as “a project”.)

When Doerr asked Moritz what one thing he would change about the industry, Moritz responded, “I think there’s a lot of hot air and arrogance in the business that we would all be better off without.”

VCs could stand to do less talking and more listening, he said. There’s a risk of making decisions based on emotion, rather than “a ruthless evisceration of the facts.”

Moritz took his own advice at the end of the interview, when an audience member asked for thoughts on Microsoft’s failed Yahoo bid, and Moritz (an early Yahoo investor and friend of chief executive Jerry Yang) decided it was best not to say anything.

Those comments seem to match Mortiz’s personality — Doerr confirmed that when the two men serve together on company boards, Moritz tends to say very little. With his focus on careful observation and wanting facts, not opinions, is it any surprise that Moritz used to be a reporter at Time Magazine?

Moritz said he looks for similar qualities in an executive, who should be a “calming, level influence who doesn’t wear his emotions or her emotions on his or her sleeve.”

(Doerr gave a more flippant answer, noting that the founders of successful companies “all seem to be white, male nerds who’ve dropped out of Stanford or Harvard and have no social life.”)

Moritz also asked Doerr to share personal memories of high-profile Silicon Valley entrepreneurs. Among the tidbits offered: Netscape cofounder Marc Andreessen has a soft spot for the Creamery restaurant in Palo Alto. Also, Doerr recalled that many of Amazon’s first orders tended to bundle programming books with how-to sex guides, which should tell you something about the company’s early customer base.

Not only have Doerr and Moritz worked together in the past, but their two firms — Kleiner Perkins and Sequoia Capital, respectively — have a long history of collaboration. In fact, Moritz said the firms have partnered for a total of 50 investments. The company names have started with the entire alphabet except for H, J, Q, V, X, Y and Z, and Moritz hopes to eventually cover all 26 letters. Maybe that news will help prospective entrepreneurs who are still searching for a company name …

Update: Jennifer Jones has sent us a link to her audio recording of the panel. It’s definitely worth a listen.

VentureBeat founder Matt Marshall would write this post but he’s busy getting ready to eat his hat.

Last month, we learned that instant message company Meebo was working on raising a round that would value it at up to $250 million. At the time, Marshall wrote: “I’m quite ready to eat my hat, if this funding happens,” because recession concerns have made investors more concerned about putting money into companies like Meebo that are still working out their revenue models.

Well, the funding appears to have happened. The Mountain View, Calif.-based company has raised $20 million on a $200 million valuation, according to Techcrunch, and was assisted by boutique investment bank Montgomery & Co. Before this story broke, a Meebo representative had contacted us to let us know that it has an announcement for tonight — which I assume is this funding news. We’ll keep you updated.

[Updated. The actual amount raised was $25 million, according to the company, and investors include lead JAFCO Ventures, with Time Warner Investments, KTB Ventures, and existing investors Sequoia Capital and Draper Fisher Jurvetson (DFJ) participating. The company currently claims more than 30 million users a month.]

Rumors that the round was nearing closure have been dogging the company since earlier this month. Meebo had talked to some companies about selling, from what we’ve heard, but instead it recently hired a chief revenue officer to help it make money on its own. The company is experimenting with ads that appear within its various instant message services, including ads that appear on its IM aggregation service on its home site, as well as in its chat rooms that you can embed on other sites.

The funding, if true, puts Meebo among the class of Silicon Valley consumer web companies that similarly have many millions of users, but don’t make so many millions of dollars. This is a trend we’ve been writing about for a number of months, most notably starting with widget-maker Slide’s $50 million round in December (announced in January) that valued it at $550 million. Some other web companies still pounding the street: Slide rival RockYou is also apparently working on a round, as is messaging service Twitter; meanwhile, social network Digg is still maybe going to sell for a couple hundred million. Of course, when it comes large amounts of web funding, Meebo is dwarfed by social network creator Ning’s recent $60 million round and the $430 million raised by Chinese social network Xiaonei.

Meebo has previously raised $12.5 million from Draper Fisher Jurvetson and Sequoia Capital.

Skype is the name that immediately jumps to mind when thinking of VoIP (Voice over Internet Protocol) calls. This is mostly due to its longevity and its easy-to-use software client. With over 300 million users worldwide, it would be nearly impossible for an up-and-comer to get close. That’s what partnerships are for.

Jajah, the online telephone service, has just announced a partnership with Yahoo to bring its service to the over 90 million worldwide Yahoo Messenger users. All Phone-to-PC and PC-to-phone calls now made via Yahoo Messenger will be on behalf of Jajah, which promises high quality and low-costs to users in over 200 countries.

This partnership comes alongside news that Jajah has just signed up its 10 millionth customer on the eve of its 2nd birthday. This represents impressive growth considering that just last year, JaJah only had 2 million customers. The company hopes that other partners, along with Yahoo, will soon get on board with its new Jajah Managed Services for business.

Jajah often gets confused with the other “J” online calling services, Jaxtr and Jangl. Jangl and Jajah actually formed a partnership back in November.

Jajah, is backed by Sequoia Capital, and raised $20 million in a third round led by Intel Capital last year.

Rackspace, the web-hosting company known for its quality support, has filed for an IPO (see its filing here), unafraid of what is otherwise a moribund initial public offering market.

The company said it will try to raise $400 million and set its price through an auction.

The underwriters are Goldman Sachs, Merrill Lynch, Credit Suisse, and WR Hambrecht & Co. Google raised its money through an auction, a move that allowed it to raise more money rather than see the proceeds go to first-day investors who flip their stock quickly.

Rackspace revenues grew 62 percent last year to $362 million, the company reported. It profits were $17.8 million, down 10 percent, however. Profits declined because the company expanded staff, sales and marketing. Disclosure: VentureBeat uses Rackspace as its host.

Rackspace had raised more than $30 million over the past decade. It was founded in 1996 by three students at Trinity University: Richard Yoo, Dirk Elmendorf and Patrick Condon. Then, in 1998, Graham Weston and Morris Miller invested seed capital into the company and took over management of the company.

The company won kudos last year when one of its data centers in Texas failed, and in response it offered $3.4 million in credits to customer accounts.

Venture capital forms Norwest and Sequoia will be among the biggest beneficiaries of a successful IPO. Norwest owns 16.2 percent of the company, while Sequoia owns 11.6 percent. Graham Weston, chairman and former CEO, owns 23.9 percent of the company.

TechCrunch caught early word of the IPO filing.

Unisfair is trying to get businesses to take virtual trade shows as more than a curiosity. On Monday, the company will announce version 2.0 of its Virtual Events for Business tool, VentureBeat has learned.

The Menlo Park, Calif., company helps businesses stage trade shows online so they can cut the costs of phsyical trade shows, yet reap the same benefits of gathering for talks and exhibitions. The new version delivers capabilities such as e-commerce, multiple-language support, and professional networking.

“The improvements are aimed at improving the stickiness of the virtual events,” said Guy Piekarz, CEO of Unisfair, in an interview.

A survey from the Factpoint Group says that virtual events attract an average of 1,587 attendees (42% of which are international). Thanks to increased attendance and the availability of detailed marketing data, such events deliver 348 qualified leads per each event sponsor.

Unisfair’s environment lets attendees create avatars, or 3-D characters, that they can use to browse through the virtual trade show. They can interact with text or voice chat. And the environment integrates with online business tools such as Salesforce.com or the Webex online meeting tool.

Clients such as Cisco and Forbes have used Unisfair to hold 415 events since the company debuted the virtual events . More than 500,000 people from 2,000 companies have attended the events. Over time, Piekarz said the virtual events will move to more of a self-serve model where companies can stage their own events without too much hand-holding.

The company closed its second round in December with $10 million (our coverage) from Sequoia Capital and Norwest Venture Partners. Sequoia invested $15 million in the first round. Unisfair has 65 employees. The company will compete against the larger all-purpose world, Linden Lab’s Second Life, as well as Forterra Systems‘ custom corporate virtual worlds. IBM has also given its own endorsement to virtual worlds as useful beyond entertainment.

Venture capitalists were already upset by The Funded, a site that lets entrepreneurs rate venture capital firms. Entrepreneurs have left nasty remarks on the the site about firms, which distressed some VCs so much that at least a few have threatened lawsuits to try to muzzle critical remarks.

Now The Funded is going a step further. It’s created numeric ratings of individual partners. This brings much more public scrutiny to the secretive VC world than ever before — and is going to make individual partners performing below their firm’s average sweat profusely.

Take, for example, ratings on the site for Sequoia Capital, which is arguably the most respected venture capital firm in Silicon Valley. Until now, all you could see publicly was its rating of 3.9 for the firm as a whole.

The Funded now lets you see much more, for example, that Sequoia partner Michael Moritz, widely considered one of the most successful partners there — he was a backer of Yahoo and Google — enjoys a rating of 4.4 out of 5 based on seven reviews.

That’s very high, and higher than the firm’s overall rating. Other partners scoring high are Roelof Botha (backer of YouTube and Meebo), who has a rating of 4.1, and Greg McAdoo (Loopt, Rockyou), who has a perfect 5. Keep in mind that The Funded launched the ability for members to rate VC partners last summer, but hadn’t opened the feature up to public viewing until now. So it hasn’t gotten as much attention and there are fewer reviews of individuals than there are for firms. McAdoo’s perfect rating, for example, is based on only two reviews. That compares to 65 reviews submitted for Sequoia as a whole.

Meanwhile, partner Sameer Gandhi doesn’t fair too well. He gets a mere 1.8, based on six reviews. The general public — people who are not members — can see this basic rating. But members get to see even more. For example, they’ll see that at least one reviewer suggests you avoid Gandhi if possible.

The Funded has profiles for 17,000 partners being profiled. They include partners, associates, chief financial officers and other professionals employed by VC firms. The Funded founder Adeo Ressi says there are some people missing, and there’s a chance a partner may still be listed at one firm when he or she has moved to another. But he says the site is about “90 percent” accurate and comprehensive.

Ressi says the partner ratings are the fastest growing part of the site.

He also noted that some venture capitalists may only invest in 15 to 20 firms during their entire career, which means there aren’t a lot of entrepreneurs available to rate them. Indeed, VCs say “no” to a lot more entrepreneurs who request backing than they say “yes” to, which suggests the ratio of critical reviewers to positive reviews will be quite high.

You can be assured that a lot of VCs will be checking their profile pages with dread over the next few days.

[Disclosure: VentureBeat has a business relationship with TheFunded, which includes linking to each other's sites.]

Google has invested $1 million in Comsenz, a Chinese provider of social network software. It’s yet another move by Google to gain a foothold in China.

The investment occurred in July as part of Comsenz’s second round of venture funding, and it was recently revealed in a regulatory filing (see p. 39). Rumors about the investment previously pegged Google’s portion at $5 million. The news follows a report that Google is preparing to launch a joint music download venture in China, largely to take on Chinese search engine Baidu.com, which has been beating Google by offering free music.

As for Google’s American competition, Microsoft has a direct presence in China, while Yahoo owns a large stake in Chinese online marketplace Alibaba.com.

Beijing-based Comsenz provides bulletin board and social networking software, as well as hosting services, to Chinese websites. (We don’t have any more details — not surprisingly, the company’s website is in Chinese.)

Comsenz is backed by former Google board member Michael Moritz. Moritz is a non-managing member at Sequoia Capital China, which owns more than 10 percent of the Chinese company. He left Google’s board last May.

Separately, Google revealed it acquired Peakstream, a company that makes it easier to run applications on multiprocessor systems and thus should help Google boost its internal server architecture, for about $20.3 million (see p. 39). That means Peakstream’s investors lost money on the deal. Peakstream soaked up $23 million over two years (our coverage) from venture firms Foundation, Kleiner Perkins — and yes, there’s that connection again — Sequoia Capital. Kleiner and Sequoia, both original investors in Google, each took in about one-fourth of the acquisition proceeds. Kleiner’s John Doerr also sits on the board of Google.

Matt Marshall contributed to this article.

updated

Bubble Motion, a Silicon Valley company that gives you a way to send text messages (SMS) with your voice instead of text, has raised $14 million in additional funding.

It came from existing investor Sequoia Capital, and new investors Comcast Interactive Capital and NCD Investors.

The company says in a statement that it has more than 135 million users worldwide, which we haven’t confirmed, but it sounds inflated. (Could the company really mean the technology is enabled by carriers that have that many users? We’re asking for more info. Update: Our suspicion was founded; see below)

The lets you click on a key, talk, and send a short message — which Bubble Motion argues is effective because it lets you show emotion in ways that a regular text, IM or email don’t.

We first wrote in detail about the company nine months ago, when it first raised $10 million, and when it said 15 percent of subscribers to Vodafone Egypt were using the service.

Update: Turns out, the company’s 135 million number represents the number of users served by carriers Bubble Motion has partnered with. The actual number of people using the voice text is only a percentage of that. David Still, product manager, wouldn’t divulge the number, but said India is the largest market for its actual users and fastest growing. Its carrier partner there has 57 million subscribers, only a percentage of has used Bubble Motion. Bubble Motion is still not accessible within the U.S. With Comcast as an investor, Bubble Motion is hoping to turn up the discussions it is having with U.S. carriers, Still said. A company called Kirusa is Bubble Motion’s closest competitor.

It’s been a while since we’ve heard from Oorja Protonics, a Sequoia Capital-backed Silicon Valley company developing an alcohol-based fuel cell technology for several years.

Today, Oorja is finally pulling off the wraps on its first application, a fuel cell for commercial and construction vehicles the company calls “ultra-powerful” in comparison to older technologies.

Oorja’s cell will power the electrical systems of vehicles like the pallet loaders used in large warehouses. The cells can be used in new vehicles, but also for retrofitting older vehicles.

It’s easy to see the benefit of using a fuel cell: Rather than having to stop operation to charge the cell, you just put in more of whatever fuels it — in Oorja’s case, methanol, which is a type of alcohol. Fuel cells burn their contents without moving parts like a combustion engine, giving them added reliability.

For the most part, though, the technology is unproven. Hydrogen fuel cells have been touted for their potential use in automobiles like Honda’s FCX, but you won’t see any hydrogen-powered cars on the roads anytime soon. Using an alcohol-based cell offers less power, but the fuel is much simpler to obtain.

Part of Oorja’s strategy is target the non-automotive vehicle market, because it’s hard to change buying habits and production standards the car market. If it can prove its technology in a low-level application, Oorja should be able to expand into other markets more easily later.

The company has taken just over $20 million to date from Sequoia Capital, DAG Ventures and Artis Capital. It’s based in Fremont, Calif.

SearchMe is another search startup that wants to take on Google.

It is a visual search engine, that shows you results in a series of revolving panes, with each pane featuring a search result. In iTunes, this format is used to feature the covers of albums, not search results.

SearchMe also has other potentially useful features. It offers categories to help you find what you’re looking for more quickly. For example, if you type in “labrador puppies,” as seen in the demo video below, you can then additionally click on an icon for puppies to clarify that you’re not looking for information about a province of the Canadian government. If you want a list of SearchMe search results instead of the visual interface, you can drag open the list from the bottom of the screen.

I haven’t had a chance to test it out myself (the site is in private beta, you can sign up on its homepage), but Kara Swisher has a more in-depth look, here. She also notes that Google is experimenting with a similar project in its labs.

Here’s the company’s video demo:

This is the latest search product from the Mountain View company — it has raised $31 million from Sequoia Capital, DAG Ventures and Lehman Brothers, to date, so it has some room to experiment. VentureBeat readers may remember it first surfacing under the name Kavam, in early 2006 (our coverage), then launching a search engine for Wiki pages that was underwhelming compared to Google’s ability to search wiki pages (our coverage).

From my outside-the-private-beta perspective, the best thing the company has going for it is the experience of the founding team — which is probably the rationale behind the large amount of funding the company has received over the years. Specifically, chief executive and co-founder Randy Adams (LinkedIn profile here) has already founded and sold a number of successful companies including Emerald City Software, bought by Adobe Systems; the Internet Shopping Network, bought by the Home Shopping Network; Navitel Communications, bought by Spyglass, Inc.; and more. In fact, Sequoia owes him one — he helped introduce Sequoia to Yahoo, which led to the firm’s initial investment in the company. Then he served on Yahoo’s board of directors during the first year of its operation. Some more details here.

It’s been over a year since we covered Skyrider, and for good reason: We hadn’t heard anything more since the company revealed its business plan, based around monetizing peer-to-peer networks with ads, in late 2006.

In the space of about three months, we’d reported that Skyrider raised first $8 million, then $12 million more from Sequoia Capital, Charles River Ventures and ComVentures. Hopes appeared to be high, but some recent digging suggests that the company may have run into trouble.

The basic idea behind Skyrider is that P2P sharing networks like eDonkey and Gnutella (also known by the programs that use their protocols, including Morpheus and Limewire) receive massive amounts of search traffic from people looking for files to download. But unlike Internet search, which is monetized by giants like Google, ads don’t automatically pop up on P2P searches.

Skyrider, which began life as anti-piracy firm CRight, stumbled upon a clever way to force ads into search results by posing as users with highly relevant files to share. The idea must have seemed like a good one — it’s rare that two venture fundings come as close together as they did for the company in late 2006.

But then came the silence. No news or appearances came from the company, and, tellingly, Skyrider vanished at some point from Sequoia’s list of portfolio companies. (Update: Looks like I’m incorrect, it actually is on there at this point.)

However, there’s reason to believe Skyrider hasn’t gone to the scrap-heap. Finance documents recently sent by a source to VentureBeat reveal that the company has raised $5 million more. The funding is listed as a series A-1 round, which may mean the company has gone through a restructuring of some sort.

Although contacts at the company either didn’t respond or let us know that they had moved on, we did manage to get in touch with a current investor. He asked to remain unnamed, but did tell us that the technology behind Skyrider is “incredible” and “totally wicked.”

And the idea still sounds valid, as well. Despite an apparent gradual decline in users (excluding Bittorrent), P2P networks still have millions of users. So what went wrong? Perhaps search software adapted to block the ads, or the idea was just too early. But hey, if you’ve got a better idea, let us know — could Skyrider still succeed?