Catchup Tuesday in Silicon Valley

Updated (see correction on FreeWebs item)

Lots going on in venture capital-tech land. Here’s a summary:

Yahoo might have a major spyware click-fraud problem on its hands. We haven’t had a chance to get our head around this completely, and haven’t checked in with Yahoo yet, but check out what online privacy hawk Ben Edelman has discovered about Yahoo. Edelman is not a shrill guy. He’s been spot-on in the past. This comes at a time when Google appears to be boasting it avoids the problem.

The NYT a bit naive on LaLa — The NYT writes quirky story about companies that “disdain profits” and “don’t really aim to compete in the first place;

Their creators are merely taking advantage of the economics of the online medium to do something that they feel good about. They would certainly like to cover their costs and maybe make a buck or two, but really, they’re not in it for the money.

It mentions the familiar cases of Craiglist, Firefox and the early incarnation of Google. But then it brings us up to date with a “fascinating new entrant in the field,” LaLa.com, the Palo Alto music-swapping site introduced last month. It cites founder Bill Nguyen saying making money isn’t the point. But wait, the company just raised $9 million in financing from the venture capital firms Bain Capital and Ignition Partners. With all due respect, these investors are known to be seriously out for profit, and so surely this can’t be an example — if it ever was – of a company that disdains profits.

Meanwhile, here’s the latest on Craiglist (scroll down). Apparently, the San Francisco online classifieds company has turned down overtures to invest from venture firms DFJ, Norwest and Redpoint.

The seed fund trend continues — Garage Technology Ventures, run by Guy Kawasaki, has raised a small seed fund for investing in companies. This is another example of the “small is beautiful” meme that appears to be shaking up the VC industry.

Freewebs has raised $1 million from former Google guy (UPDATE: This should read: “Freewebs has raised $1 million from former Google guy and others) — Freewebs is a Maryland company that has quietly created Web sites for millions people, with little hype or publicity-mongering. A couple of its executives came through town a few weeks ago, and we bumped into the CEO while he was on the trail chatting with investors. The company has raised no venture capital, but they’re getting ready to start gunning for the big time, and are looking to raise cash from a well-connected firm. It may not be the next MySpace, but you can’t argue with tens of millions of users and visits quoted in the story. Right now, it makes money by running Google ads on the side of the free Web sites, among other things. It’s no surprise that it has raised a $1 million bridge loan from a former Google employee, Bobby Yazdani, founder of Saba Software and Amidzad, the venture firm started by the rug merchant guys we wrote about a couple of weeks ago. The former Google employee, Aydin Senkut, who we mentioned earlier as now being fresh on the prowl for investments, confirmed this with us.

Sequoia investing like its going out of style — Is it just us, or is well-known Silicon Valley venture firm Sequoia Capital investing on a tear lately? We mentioned a bunch of investments here, and separately Radiate and Kavam.

Now we hear that Sequoia has also joined in a $10 million investment into East-coast company Eons, a site for elderly Americans, run by Jeff Taylor. Nice name, though not much happening yet at the site. It is another example of Sequoia’s aggressive foray outside of Silicon Valley recently.

Moreover, Clearwell Systems, a Santa Clara email analytics company raised money last year from Sequoia, and made it official today by announcing it had raised $12 million in a second round of financing, also joined by Sequoia. Redpoint led the round.

Chief executive Aaref Hilaly dropped by to visit our Palo Alto bureau (we also have offices in Fremont, SF and SJ, if anyone wants to visit) back in January and he told us about the initial investment. Clearwell lets companies organize their email more efficiently, for example allowing them to customize which employees see what sort of information, or giving employees the right to search only certain types of email. Clearwell’s analytics can help compliance with disclosure regulations, and so on.

Meanwhile, across the street…. — …on Sand Hill Road, the other Silicon Valley powerhouse venture firm, Kleiner Perkins, is trying to hold its own. Ray Lane, a partner there, joined Kleiner a couple of years ago, leaving his job as former chief operating officer at Oracle. Now it looks like he’s pulled off his first investment. We hear yesterday that SAP has acquired one of the companies he’d backed, Virsa Systems, of Fremont, where he is also a board member. Virsa sells software that helps companies with corporate compliance and risk management. The company’s annual revenue rate is about $100 million, according to chief executive Jasvir Gill. Acquisition prices are typically a multiple of that revenue rate, and so we have strong reason Kleiner made good money off the deal — since it the total invested was only about $16 million, and we heard they made the investment at a valuation lower than $100M.

We’ve neglected biotech: We at SiliconBeat don’t write much about Silicon Valley biotech companies, in part because biotech feels like its own little world. But biotech companies are really the only ones with much juice these days, in terms of IPOs. Last year, four of the eight venture-back companies in Silicon Valley to go public were biotech. Now, in the first quarter of this year, research groups like VentureOne and NVCA are announcing news confirming that biotech rules: Seven of the ten IPOs during the first quarter are biotech.

Rapport, a new chip company — When Redwood City company Rapport told our colleague Dean Takahashi that it is building a 1,024-processor chip, Takahashi got interested, and does a write up here (free registration). It has raised $10 million to date, from TechFarm Ventures in Mountain View, and is looking for more. This is style of chip where many processors operate in parallel, and so they can deliver smoother high-definition video and so on.

Radio 2.0. Here’s the latest social music site launched today by Silicon Valley start-up Mercora: Radio 2.0.

If Korea can do it, why can’t we? — We’re referring to news that South Korea is introducing super-fast wireless internet service, called Wi-Bro, which will let residents remain online on the go — at 10 megabits per second, faster than most broadband connections! Come on mayors Newsome, Gonzales et al. How about Silicon Valley?

Learning typography — The NYT’s Thomas Friedman had a good story over the weekend (no link, we’re afraid) about how innovation is a synthesis of art and science, and that the best innovators combine the two. He mentions how India and China are beginning to fret about having too many engineers, even as we fret about not having enough. Steve Jobs shows how it is done: He dropped out of college, took a caligraphy course, and then recalled it a decade later when designing the first Mac. No hard news here. Just a reminder to keep your priorities straight.

Censor-free Web in China? — San Diego’s Anonymizer today unleashes a software specifically for Chinese citizens, to enable them “safe access to the entire Internet by circumventing the Web filters put in place by the government.”

The software shields personal identities, and so no retribution possible, the company says.
Chinese citizens can download the free software at www.xifuchun.com.

We’re not sure how this is going to work long-term, because the Chinese government will soon hear about this, and block access to the URL. Indeed, the www.xifuchun.com site wasn’t working when we tried it earlier today (even for us in the U.S.). Google chief “Internet evangelist” Vince Cerf suggests the Chinese government has 30,000 people blacklisting websites.

The Anonymizer company concedes there will be cat-and-mouse game, and says it will constantly change the URL. The program’s success, the company says, relies heavily on word-of-mouth promotion, and so a “tell a friend” function has been added to the site. We’ll be interested in seeing whether this works, and how.