Microsoft has confirmed it is cutting 800 positions across the company today, in its third round of layoffs this year. About a quarter of the jobs are in the Seattle area, and an unspecified number of employees in Massachusetts are impacted, among other regions. It is not yet clear which product groups and divisions will be most affected. The news was first reported by TechFlash, and confirmed by PaidContent.

Back in January, Microsoft announced 1,400 layoffs and a plan to eliminate up to 5,000 jobs over the course of 18 months. That was followed by a second round of cuts (an unspecified number) in May. But today’s cuts seem to push the total number of job losses beyond the originally stated 5,000—though with the company continuing to hire in some areas as it cuts in others, it is hard to track the exact number. The latest round of layoffs comes on the heels of Microsoft’s (NASDAQ: MSFT) announcing an 18 percent quarterly decline in profits as compared with the third quarter of last year.

Microsoft is also leaving the door open for additional cuts—a move that seems honest, but could be demoralizing to employees and prospective hires. In a statement given to Xconomy (and to PaidContent first), a Microsoft spokesperson wrote: “Earlier this year, we announced that in order to reduce costs, increase efficiency and prioritize our focus areas, we would eliminate approximately 5,000 positions by June 2010. Today, we are eliminating around 800 positions spread across multiple businesses and locations and have completed our reduction plan sooner than we had anticipated 11 months ago. At the same time, we continue to hire in priority areas, but also understand that continuing to manage our businesses closely, as we always do, can mean additional headcount adjustments.”

The spokesperson added, “We are not breaking out figures by location, but I can confirm that Massachusetts was impacted by today’s job eliminations. We are working with the individual employees to assist them through this transition.”

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Massachusetts Governor Deval Patrick traveled to Holyoke, MA, yesterday to talk about the next steps for the planned Holyoke High Performance Computing Center, a massive project designed to advance the state of the art in “green computing” for life sciences, cleantech, and other applications, while also bolstering business development in economically depressed western Massachusetts. Construction is slated to begin in the fall of 2010 and be completed in late 2011, the governor said.

The partners in the project—which is a collaboration between the Massachusetts state government, Accenture, Boston University, Cisco, EMC, MIT, and the University of Massachusetts—have raised over half of the money needed for construction, according to a press release yesterday from the governor’s office. (The actual dollar amounts weren’t named in the release.)

Since the state’s initial announcement about the project in June, the partners have made “considerable progress” on a working plan for the facility, according to the release. That includes setting up an organizational and business structure for the center, estimating capital costs and operating budgets, outlining a research agenda, and creating preliminary building designs and construction schedules. It’s expected that the facility will be located somewhere near the Connecticut River, which produces abundant hydroelectric power, or along Holyoke’s network of industrial canals, which could provide cooling water for its computing and climate-control equipment.

The three academic institutions contributing to the Holyoke center—BU, MIT, and UMass—issued a statement yesterday saying they are committed to “work diligently over the next 120 days with the Governor, Housing and Economic Development Secretary Bialecki, Energy and Environment Secretary Bowles, and other cabinet officials, Congressman Olver, Holyoke officials and our colleagues in industry to move to the next stage of planning the HPCC.” The statement said the next steps include acquiring a site, setting up agreements on how the various institutions involved will share responsibility for the center, and raising the rest of the money required.

Several entities assisting with the project—the Pioneer Valley Planning Commission, the City of Holyoke, and the John Adams Innovation Institute—have also collaborated to launch a website called Innovate Holyoke as a resource for news on the facility. The site was developed by Ten Minute Media, a Web design company run by young Holyoke-based entrepreneur Brendan Ciecko, who wrote about the computing center project for Xconomy in June.

In remarks yesterday, Governor Patrick said the computing center would serve as “an anchor of a highly competitive and vibrant innovation district in the Pioneer Valley,” which includes the three western Massachusetts counties traversed by the Connecticut River. “The potential for job growth and advances in technology and research is unprecedented, and both the center and this collaboration will serve to create long term prosperity for Holyoke and regional economies throughout Western Massachusetts.”

[Update, 10/23/09: The John Adams Innovation Institute of the Massachusetts Technology Collaborative has published a useful summary of yesterday's event in Holyoke.]

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[Corrected, October 22, 2009 --- see below] I really hate the Yankees (sorry Bijan). Nothing good has come of them for me, except the time back in the early 90s when I was at Yankee Stadium with Trip Hawkins of Electronic Arts fame and Richard Nixon was sitting across the aisle, and two Secret Service guys offered to get us his autograph. I hated Nixon, too, but we were beaming like kids waiting for him to sign the baseballs we hurriedly bought from the souvenir stand…But I digress.

[Correction: Trip Hawkins informs me that the game where we got Nixon's autograph was at Shea Stadium, not Yankee Stadium! So the Yankees haven't done anything for me.]

With the Red Sox dead and the Yanks in the AL Championship Series, I figured why not come up with a different kind of Boston vs. New York championship series: the AL VC Championship Series. Last week, I took a deep data dive into third quarter venture deals in Massachusetts. This week I did a little research into how New York VCs fared, and figured let’s stack them against the MA home team. I do this for no other reasons than a) New York is a major player in venture and b) the comparison makes me feel better about the Yankees rolling their way toward the World Series.

All the data is from ChubbyBrain, our New York-based (but surely they love the Sox) partner and information services company developing tools for investors, startups, and aspiring entrepreneurs. Click on any image to make it larger. Let’s play ball.

Summer swoon for the VC Yanks while the VC Sox step it up down the stretch.

Looks like the NY VCs were at the ballpark watching the Yanks in September—Sox kept their focus.

Internet investments going to extra innings.

But VC Sox clearly have a more balanced lineup.

Now for the World Series. I hear California has some good teams.

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North Shore Innoventures, a Beverly, MA-based network of technology incubators, announced today that it has opened a new “Cleantech Innoventure Center” in Lynn, MA. Established with funding from the Commonwealth of Massachusetts and sponsorship from the Lynn Economic Development and Industrial Corporation, the new incubator space is located at 20 Wheeler Street in Lynn, and is already home to one company, building-management software startup Magniture Systems. North Shore Innoventures said it also plans to open a Biotech Innoventure Center at the Cummings Center in Beverly, MA, later this year.

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Just about everyone loves a good pie…chart, that is. If you’re one of those, read on.

On Tuesday, we ran a story here in Boston about all the September venture deals in Massachusetts—and then my colleague Bruce followed that up a bit later that same day with a national roundup of third-quarter venture figures.

Both those stories relied on data provided by our partner ChubbyBrain, a New York-based information services company developing tools for investors, startups, and aspiring entrepreneurs. And they contained a few interesting charts and tables.

Today, though, I can’t resist sharing more of the details on Massachusetts from ChubbyBrain’s extensive third quarter report, “Pulse of the Innovation Economy,” which holds far more information about venture deals numbers, VC dollars invested, hot sectors, and stage of investments than we could cover in our more general posts on Tuesday.

So here we go. If your eyes are having a bit of trouble picking out the details, just click on any image to enlarge it.

The Bay State and New England are distant seconds—can anyone say “California?”—in both deals and dollars.

VC investment in MA showed a nice rise in Q3 vs. Q2 of 2009.

VCs took some vacations in August.

Burlington?

Healthcare and Internet dominate—but there is diversity of investment.

Whoever said early-stage deals are dead in MA is dead wrong.

We got our Web on.

No. 2 in mobile and telecom. Cowboys in Colorado and Texas closing in?

Has the bloom gone off the cleantech rose?

I live in Cambridge.

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In his 2006 run for the Massachusetts governor’s office, Deval Patrick campaigned on the need to make the most of the state’s “creative economy,” meaning industries such as advertising, architecture, design, digital media, film, gaming, marketing, music, publishing, tourism, and the arts. It’s a sector that employs at least 100,000 people in the state, and that has long been one of the Boston area’s strengths. But Patrick’s point was that putting even more emphasis on these industries, through public and private investment, could help to counteract declines in other fields such as manufacturing, bring in more high-paying jobs, and maybe even make life more interesting.

Well, the recession that set in shortly after Patrick took office and the state government’s resulting financial woes have pretty much ruled out significant new public spending on creative-economy programs. There’s even a movement to roll back the state’s one major economic initiative in the arts, the costly film tax credit enacted under Governor Mitt Romney in 2005 and expanded under Patrick in 2007. But Patrick has made good on his campaign promise in other ways, notably by launching a new Creative Economy Council to identify the biggest needs in the creative sectors and appointing a full-time “creative economy industry director” within the Massachusetts Office of Business Development to work directly with companies in these sectors.

The man who fills those shoes—and, so far as Xconomy can tell, the only person in any U.S. state agency explicitly tasked with helping local creative industries—is 33-year-old Jason Schupbach. While peers at the MOBD cover areas such as life sciences and defense, Schupbach’s primary job is to help for-profit businesses in the creative sector find the resources they need to grow in the state. (The MOBD is part of the Executive Office of Housing and Economic Development; last month we published an extensive two-part interview with Greg Bialecki, who heads that office.) Schupbach is also pinch-hitting right now as acting technology industry director while that title’s usual holder, Tito Jackson, is on leave to run for an at-large seat on the Boston City Council.

Schupbach seems omnipresent in the entrepreneurship community lately. If you’ve been to recent events such as the TechStars Investor Evening on September 11, the Tech Tuesday game-industry meetup on September 15, or the MassTLC gaming panel at the UK Consulate on September 24, you’ve probably run into him or seen him speak. His oft-repeated refrain at these events is that the Patrick Administration cares about the state’s innovators, and is ready to promote their work in any way it can. One recent mark of that recognition was Patrick’s proclamation of September 9, 2009 (the day Harmonix Music released Beatles: Rock Band) as “Video Game Innovation Day”; Schupbach showed off the signed, leather-bound proclamation at several local meetups.

A 2003 graduate of MIT’s Master in City Planning program, Schupbach studied under the late J. Mark Schuster, a well-known proponent for cultural policies in urban planning. “I was really interested in how the arts and culture and creative fields fit into the design of a city,” Schupbach told me in an interview late last month. “I wanted to be a city designer, but I wasn’t very good at the design part, so I ended up writing my thesis about the trend of cities trying to bring artists into their downtowns.” He won the best thesis award—and went on to do exactly what he had written about, working for New York City’s Department of Cultural Affairs and then for the Ford Foundation’s Artist Link project, which promotes affordable urban housing for artists.

In our interview, snippets of which are highlighted below, I asked Schupbach to describe his more recent role at MOBD and to talk about the office’s biggest creative-economy initiatives. While the state’s revenue crunch means that his job is largely about directing businesses to existing resources, along with a good measure of cheerleading, Schupbach says a recession is actually a good time to think and plan (that’s one of the roles of the Creative Economy Council, which he coordinates). “The state budget will come back. Things are cyclical,” Schupbach says. “This is the time to plan and write law for when there is money around.”

On the state’s new focus on retaining local innovators:

We are never going to be the state that pays a zillion dollars to move Boeing here. We don’t have oil money like Louisiana. What we have is an enormous amount of talent that’s here already, and we have to figure out the best way to get them to stay here so that we’ll have the next billion-dollar company here. That’s why you see us trying to …Next Page »

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This article was written with Geoff Mamlet.

Today, some of our legislators will hold a hearing at the State House to discuss changes in Massachusetts’ non-compete laws. They would do well to heed our own past as an open employment state.

In the mid-1780s, Samuel Slater was a young apprentice in England working for the men who created the world’s first mass production system: a system which produced thread from cotton. At the time, Britain was intent on protecting its technology, and it was illegal for British citizens to emigrate and take with them the knowledge of British technology. See http://en.wikipedia.org/wiki/Samuel_Slater.

The American textile industry was desperate for a way to compete against the British. They offered a bounty of $100 to people willing to import British technical knowledge. “For which man will bring us English models, will be given monetary funds for his reward.”

Slater, at the end of his apprenticeship, emigrated to the US, taking with him his knowledge of the British mill technology. Arriving in Beverly, Massachusetts, Slater used his skill to build there the first cotton mill in America. He went on to produce numerous improvements to the British designs.

The innovations introduced by Slater are recognized as having kicked off the industrial revolution in America, and he became known as its father. By 1810, there were 50 mills spinning cotton into yarn or thread. By 1815, there were 140 mills within 30 miles of Providence alone, with 26,000 people on the payroll.

The freedom Slater had in Massachusetts to practice his trade, despite restrictions elsewhere, made our region the center of a technology boom that changed the world.

We would like to leave our legislators with this thought: today’s Massachusetts non-compete law does not prevent a young person from following in Slater’s footsteps. It merely encourages that young person to do so in California. Surely this is short-sighted.

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As you might have noticed around Boston, a lot of people like to whine about how California and especially Silicon Valley are, well, just better at startups. Entrepreneurs flock to California, where venture capitalists take more risks. Why, oh why, can’t we be more like Silicon Valley?

Well, it turns out VCs and entrepreneurs in California beat Boston and Massachusetts in another measure: big venture-backed flops. Yesterday, Dan Primack over at PE Hub ran a fun piece called the “10 most expensive VC-backed busts of 2009,” where he listed the top flameouts of the year in terms of venture dollars invested when the company finally closed its doors.

Now, I like lists about doom and gloom as much as the next guy, so I dived in. But as I read through it, I couldn’t help but notice that the list is dominated by California and Massachusetts firms. So I started counting. It turns out six of the 10 are from the Golden State—and five of those are what you would call Valley firms (the sixth is from San Diego). Three are from Massachusetts. The lowly straggler is Bermuda-based geostationary satellite services operator Protostar.

What’s more, the California firms tend to clump up at the top of the list. In fact, in terms of venture dollars lost, using PE Hub’s numbers, VCs lost upwards of $650 million on the California firms listed compared to a mere $255 million gone town the toilet on the Bay State firms.

Now, of course a big part of what’s going on here is that California firms attract more venture dollars overall, so the flameouts are also naturally concentrated there as well. And I’m sure that when the IPO and M&A numbers are tallied for the next year California will be back on top. But meanwhile, Massachusetts supporters can point to something the Bay State did better than California (although the really gloomy ones here will say the Valley beat us again).

Here’s my condensed list of the PE Hub list, ranked by approximate VC dollars lost and with MA firms in bold.

1) Novafora (San Jose, CA) — $267 million *

2) OmniSonics Medical Technologies (Wilmington, MA) — $113 million

3) Hammerhead Systems, (Mountain View, CA) — $100 million

4) Protostar (Bermuda) — $90 million

5) Cosentry Networks (Milpitas, CA) — $80 million

6) Sequoia Communications (San Diego, CA) — $75 million (Note: Xconomy has this one at $86 million)

7) Autonomic Networks (Mountain View, CA) — $71 million

8) SiCortex (Maynard, MA) — $68 million

9) Cogentus Pharmaceuticals (Menlo Park, CA) — $62.5 million

10) Dynogen Pharmaceuticals (Waltham, MA) — $67 million

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At Akamai headquarters in Cambridge, MA, today, state officials took the wraps off a cross-media campaign intended to promote Massachusetts as a place to study, live, work, vacation, or grow a business. The new website for the campaign—themed “It’s All Here“—brings together resources for entrepreneurs considering starting their companies in Massachusetts, students looking for jobs in the state, residents looking for housing or recreation opportunities, and the like.

Gregory Bialecki, the secretary of the state’s Executive Office of Housing and Economic Development, said at a ceremony unveiling the website that one of the campaign’s goals is to be “unabashedly positive” about the state’s attractions. “One of the things that we suffer from a bit is New England modesty,” he said. “We’re not going to do that. We’re going to err on the side of bragging.”

Bialecki pointed to the fact that about 20 percent of all Internet traffic passes through servers at Akamai, which is hosting the new site. “They are a critical part of the Internet infrastructure for the world. That’s not bragging, they are doing it every day.”

The tag line “It’s All Here” was actually introduced by the administration of former Massachusetts Governor Mitt Romney back in 2003 as part of a campaign to bring new businesses to the state. It’s since been appropriated by the state’s office of travel and tourism. But the effort launched today is broader, intended both to advertise Massachusetts’ strengths to the rest of the world and to persuade students and consumers who already study or live here to stay.

Bialecki described the campaign as a non-partisan, public-private collaboration that transcends any one governor’s administration and any one political regime. Key groups involved include the Department of Business Development (a part of Bialecki’s agency), the Massachusetts International Trade Council, the Massachusetts Development Finance Agency, better known as Mass Development, and the Massachusetts Alliance for Economic Development, better known as Mass Econ.

Kofi Jones, the director of communications and public affairs for Bialecki’s office and one of the creators of the new campaign, demonstrated the “It’s All Here” website for a packed room of business community members and onlookers at Akamai. The site is divided into sections entitled “Grow,” “Live,” “Play,” “Work,” and “Study,” with each section featuring links to government and non-government information resources as well as a clickable map highlighting regional resources or attractions. Personal testimonials pepper the site, including one from Mohamad Ali, a former IBM executive who recently joined Avaya. “Living and working in Massachusetts has provided my family with unrivaled opportunity,” Ali’s quote reads.

The “Grow” section will likely be of most interest to Xconomy readers. It features sub-sections on business resources around the state as well as roundups of resources in specific clusters such as clean energy, defense, information technology, life sciences, manufacturing, and foreign trade and investment. A featured section of the site, entitled Opportunity Here, includes a guide to networking opportunities for job seekers as well as actual job listings.

Jones said the website was designed by 451 Marketing, a Boston-based inbound marketing agency.

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Massachusetts “digital gaming” companies have total revenues exceeding $2 billion, according to a survey being released today by the Mass Technology Leadership Council. And those companies are hiring aggressively, with plans to increase their head counts by an average of 20 percent in 2009, the survey found.

The gaming industry employs roughly 1,200 people across the state, in disciplines like software engineering, digital art, game design, and quality assurance, according to MassTLC—an industry-sponsored association that promotes technology entrepreneurship. Only 8 percent of the companies the association surveyed are public, meaning that most of the ferment in the gaming industry is happening within venture-funded companies (8 percent) or smaller angel-funded or privately funded companies (79 percent).

MassTLC says it collected the survey data between January and June from more than 30 Massachusetts gaming companies, including 38 Studios, GamerDNA, Harmonix Music Systems, Quick Hit, Rockstar New England, Turbine, and WorldWinner. The association says it will use grant money awarded to UMass Boston by the UMass President’s Creative Economy Initiatives Fund to continue its research and “take a deeper dive into the impact of the industry on the Massachusetts economy,” in the words of today’s announcement.

“The digital gaming industry is on fire in Massachusetts,” Massachusetts Governor Deval Patrick said in the announcement. “I am committed to supporting this and other creative economy industries, for the job opportunities they create and for what they do to elevate Massachusetts’ strengths as a center of technology innovation.”

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Gregory Bialecki is Massachusetts Governor Deval Patrick’s Secretary of Housing and Economic Development, and leads an ungainly collection of agencies charged with everything from promoting affordable housing in Massachusetts to attracting international business investment to the state. Here at Xconomy, we cross paths with Bialecki quite a bit, since he’s also responsible for many of the state’s initiatives to support high-tech innovation and greater collaboration between business, academia, and government.

I interviewed Bialecki at length last week, and in Part One of our conversation, published yesterday, I asked him how his work as an attorney specializing in real estate development and land-use permitting related to his current business-development role for the state. We also talked about the roles state government can play in promoting innovation. Bialecki said the Patrick Administration has spent much of the past two years simply helping players in various technology sectors to recognize that when it comes to working with business, state government can play a supportive rather than an adversarial role.

In particular, we were talking as Part One closed about the state’s obligation to help business by improving the quality of science, technology, engineering, and math education for young people. In this second half of the interview, I pressed him for more examples of things state government can do to accelerate innovation. And we went on to talk about the need for more funding to move ideas from the lab bench to early-stage commercialization, the debate over non-compete agreements in employment contracts, and the Administration’s progress drafting new business regulations on protecting consumer data.

Xconomy: I think it’s pretty easy for everyone to agree on the importance of science and engineering education. But what are some of the other parts of this innovation agenda—things that maybe are not so easy to agree on?

Secretary Bialecki: There are other aspects of the innovation ecosystem, if you will, where I think we can play a partnering role. When it comes to thinking up great ideas, Massachusetts is fantastic. But when it comes to converting those good ideas into commercial products and services, we need to do a better job. The way to do that is a collaboration between business and academia and government to look systematically at the ways we do that. In other words, what great ideas are behind the university walls right now that aren’t coming out? When I describe the state government [as] having a partnering role, in many cases it’s as simple as being a convenor or facilitator. So, for example, the Governor, who is very interested in innovation, has the capacity to say to all of the public and private universities, “Can we get together and compare notes and talk about how we are commercializing our ideas? Who has the best practices and are there things we can learn from each other? Are there things the state can do to make public universities better at it?”

That’s one of the things we are focused on—learning from universities and businesses the ways we can make these connections better and literally get good ideas out of the lab and into …Next Page »

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From his corner office on the 21st floor of the MacCormack State Office Building on Beacon Hill, Gregory Bialecki has what is probably the best view of any state official in Massachusetts. To the south, the floor-to-ceiling windows peer over Boston Common, Downtown Crossing, the South End, and South Boston; to the east, they look toward Back Bay, the Charles River, and MIT.

But if any official can benefit from such an expansive view, it’s Bialecki. As the secretary of the Executive Office of Housing and Economic Development, after all, his job is to help all the people he looks out upon find homes to live in and jobs to go to. Because his office includes the state Department of Business Development, he’s also in charge of attracting new employers to Massachusetts and making sure that existing employers stay here and grow. And that means he’s the point man in Governor Deval Patrick’s administration for all efforts to build on the commonwealth’s track record of high-tech innovation, through efforts like the Massachusetts Life Sciences Center, the Massachusetts Clean Energy Center, and the new MassChallenge business plan competition.

In the inaugural post of his “Mass Innovation” blog in July, Bialecki argued that innovation gives Massachusetts its fundamental competitive advantage, but that the state still needs “a deliberate innovation agenda” to improve collaboration between industry, academia, and government. A Newton, MA, resident and Harvard-trained lawyer, Bialecki replaced former Cabinet secretary Daniel O’Connell in January. He invited Xconomy to his office last week for our first formal interview; the questions we covered ranged from Bialecki’s background to non-compete agreements, data privacy regulations, and the role of state government in funding early-stage commercialization work. We’ve condensed and edited this far-ranging conversation. Part 1 follows here; we’ll publish Part 2 tomorrow.

Xconomy: You’ve practiced law with big firms like Hill & Barlow and DLA Piper. What kinds of work did you do for them?

Secretary Bialecki: Over the years, the vast majority of my clients were in real estate development. There’s a lot of moving parts in real estate development. Your clients are buying land, designing projects, getting permits, getting tenants, getting financing. Within that broad outline, my specialty was permitting and land use regulation. So I tended to work with clients who had chosen projects that, by either their size or their location, involved very significant land use issues. For example, with the Fan Pier site in Boston, I represented the Pritzker family at the time they acquired the property. The zoning had been the same for decades, and was consistent with the history of South Boston’s waterfront—there were warehouses and parking lots and an old industrial neighborhood, and Fan Pier itself used to be a trainyard. So if Fan Pier was going to be redeveloped and brought into the current generation…a critical element was to work with the city and the state, because in Massachusetts, waterfront property is subject to very significant state land use regulations. So advancing that involved working with the city and the state to come up with new zoning and land use regulations that would accommodate a new generation of uses for that site [which is now home to a convention center, several hotels, a federal courthouse, and the Institute of Contemporary Art].

X: How do you feel this sort of work prepared you for your current role helping the Patrick Administration interface with the business community?

GB: In permitting and land use work, even when you’re representing private clients, you’re very involved with the public sector, because you’re working very closely with …Next Page »

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If you’re fortunate enough to be gainfully employed, you may have joined the droves of other Boston-area innovators who have headed for the Cape, the White Mountains, or another summertime retreat in recent months. Or perhaps you’ve been busy looking for your next career challenge. Either way, with Labor Day fast approaching, we thought it’d be useful to tie together labor trends and some of the larger layoffs that have occurred at technology and life sciences firms in New England since Memorial Day.

First, it’s been encouraging to see that our Boston Tech Layoff Tracker has not been as busy this summer as it was over the previous spring, winter, and fall seasons. Perhaps this is another sign that the worst of this economic recession is behind us. Since June 1, we’ve recorded that Massachusetts-based life sciences and tech firms announced a total of 718 jobs would be cut in their organizations. Now, that doesn’t include the small startups we follow that have been cutting jobs without officially announcing the layoffs: For example, we reported this month that Chelmsford, MA-based online music startup OurStage downsized its ranks from 38 to 17 workers last fall after some investment dollars failed to come through. But this summer’s layoff total to date marks a significant falloff from the 971 layoffs we recorded at Massachusetts life sciences and tech firms in the spring months of April and May.

It’s been a tough year for innovation companies here and everywhere, but layoffs seem to have peaked in the first quarter of this year. State figures show that the impact of layoffs among tech and life sciences workers in the Bay State is consistent with the impact on workers in the rest of the economy. (Of course, the state says that jobs in industries such as construction and financial services have been hit the hardest by layoffs in the commonwealth.) According to the most recent employment figures from the state’s Executive Office of Labor and Workforce Development, the number of professional, scientific, and technical jobs in the commonwealth fell from about 258,200 in June 2008 to 249,700 this June, a 3.29 percent decline. (Admittedly, these figures are just an indication and the job category the state uses does not reflect all the jobs in tech and life sciences firms.) The state labor agency reported that year-over-year employment levels for all non-farming jobs in June were down about 3.2 percent, meaning that the layoff trend has far from spared local innovation-based firms.

Here is our recap of the summer’s largest tech and life sciences layoffs in the Boston area:

—Just last week, Sonus Networks (NASDAQ: SONS), a Westford, MA, company helping cable, wireless, and telephone companies with the transition to Internet-based communications, announced a fourth round of layoffs as part of its ongoing “rightsizing” effort, this time affecting 93 people. Sonus let go 50 workers in December, 40 in January, and 60 in March, for a total of 243.

—Analog Devices (NYSE:ADI), the Norwood, MA-based maker of micro-electro-mechanical system (MEMS) chips for multiple industries, told the Boston Globe earlier this month that the company plans to cut …Next Page »

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The argument over non-compete clauses in employment agreements is front and center in most discussions over ways Massachusetts can square up better against Silicon Valley. Proponents of getting rid of non-competes argue that they curtail innovation. Fearful of getting sued when they leave their employers, so the theory goes, would-be entrepreneurs either forego starting their own companies or move to places like California where the courts don’t enforce non-competes.

Massachusetts state Representative Will Brownsberger and Xconomist Tim Rowe, CEO of the Cambridge Innovation Center, have both advocated getting rid of non-competes. Brownsberger filed a bill early this year seeking to outlaw them altogether, but last month teamed with fellow representative Lori Ehrlich to file a compromise bill that would limit, but not outlaw non-competes. Just five days before news of the compromise bill came out, Rowe contributed a post to the Xconomist Forum detailing his own views on why non-competes should be banned.

Rowe’s post attracted quite a few comments. But this past Saturday, Brownsberger kicked off a new round of discussion in the comment stream by raising a question about Rowe’s interpretation of venture investment trends in California and Massachusetts.

Rowe responded right away, and both dived deeper into venture data to come to an interesting and very collegial understanding that they also shared with readers. One conclusion was that if you look at venture investment data over the past 15 years, there really isn’t evidence one way or another that non-competes hinder Massachusetts startups. As Rowe wrote: “I agree with Will’s analysis: measured from 1995-2009, the ratio of VC investment in California to New England is almost exactly flat, and since non-compete policy didn’t change over this period, we can’t infer anything about non-competes relative to VC investment.”

Their discussion raised other questions—including wondering why Massachusetts seems to have lost share in more recent years to California after gaining ground from 1995 to 2002. In the end, Rowe and Brownsberger seem to agree that the venture data itself is ambiguous, and that it’s important to look at other information—such as the actual experiences reported by employees, investors, and business leaders—to gauge the impact of non-compete agreements. Since this all happened on a summer Saturday, and since they are looking for some more insights from others, I thought I’d point it out. You can find the comment stream here.

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[Updated with extensive comments---see pages 2 and 3] In a message posted yesterday on his “Mass Innovation” blog, Massachusetts Secretary of Housing and Economic Development Gregory Bialecki says the case for outlawing noncompete clauses in employment contracts in the state is not yet “sufficiently proven” for Governor Deval Patrick’s administration to throw its weight behind proposals to ban or modify them.

It’s the first time a member of the Patrick Administration has come down on either side of the noncompete debate, which has been heating up in business, investment, and legislative circles over the past year.

In past comments, Governor Patrick himself has said that his administration has no particular stake in preserving existing Massachusetts law, which allows employers to make new workers promise they won’t switch to competing companies or start their own competing businesses for a year or more after they depart. Critics of the practice argue that it retards innovation, and that states where courts don’t enforce such clauses, such as California, have an economic advantage over Massachusetts.

In his post, Bialecki says the Administration is “aware of the arguments in favor of changing our current situation,” including the California example, academic studies showing that noncompete clauses slow entrepreneurial activity, and arguments lodged by local business and investment leaders such as Tim Rowe of the Cambridge Innovation Center and Bijan Sabet of Spark Capital. (Rowe, Sabet, and State Representative Will Brownsberger have all shared their reactions to Bialecki’s post with Xconomy; see below.) Bialecki calls a change in the law around noncompetes a “potentially intriguing” way to support innovation in the state.

However, the post also lists seven reasons for leaving the current law around noncompetes intact. To boil them down: change would be disruptive; many technology industry insiders are against it; even some small startup executives and venture capital partners favor the clauses; employees harmed by noncompete agreements are often the victims of “unreasonable or overzealous abuses”; it would be better to wait for economic recovery to make such a change; and the market might correct the problem on its own, “if companies that don’t require non-competes make a big deal of this issue and thereby recruit talent more successfully than those that do.”

Bialeck concludes: “On balance, we don’t yet see the case to have been sufficiently proven that a change in our existing laws will be a significant improvement to our innovation ecosystem. But we will continue to keep on top of the debate.”

In remarks yesterday at Microsoft’s New England Research and Development Center, Massachusetts Attorney General Martha Coakley (an elected official who is not appointed by the governor) appeared to take a somewhat more favorable stance toward …Next Page »

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In an informal discussion with technology leaders from industry and academia this morning at Microsoft’s New England Research and Development Center in Cambridge, Massachusetts Attorney General Martha Coakley and staff members from her office covered a range of issues affecting technology businesses and consumers, from cybercrime to the need to overhaul the state’s laws regarding noncompete agreements. Overregulation and outdated regulations were a major theme, with Coakley acknowledging in jest that “we love statutes and regulations in Massachusetts” and saying that in a time of severe budgetary constraints, changing and updating the law is one thing the state government can do to help businesses and entrepreneurs.

The meeting, the first of its kind between representatives of the technology community and the state’s top law enforcement officer, was intended to start a discussion about what sorts of changes to put on the agenda. “We can’t make decisions in the abstract,” Coakley told the gathering of about 30 people from Massachusetts companies and universities. “In a variety of areas where we’ve approached these issues—what technology means for government, for public safety, for privacy—part of what I want to do is get some feedback from you. What are we doing and not doing, and how can we be more helpful?”

Coakley poked a bit of fun at herself, confessing that as late as the mid-1990s, when she was chief of the Child Abuse Prosecution Unit of the Middlesex District Attorney’s Office, she did not know how to turn on her computer to retrieve her e-mail. But after she became DA herself, she said, she got a crash course in computers and the Internet during the prosecution of Michael McDermott, who killed seven colleagues at Edgewater Technology in December 2000 and was convicted of murder after it was revealed that he had used Google to search for information on how to fake mental illness. As Massachusetts attorney general, she led settlement negotiations with Framingham, MA-based TJX to resolve claims around its massive data breach in 2007, and to make sure adequate safeguards are in place to protect consumer data in the future.

“I really like being attorney general, somewhat to my surprise,” Coakley said, “because it’s a great opportunity to learn about a whole range of issues, like where we should be going and how we can help businesses do well in Massachusetts, and how to protect consumers and protect the environment.”

The first issue raised by technology community members was whether Massachusetts should be doing more to make sure that some federal stimulus money reaches small businesses, rather than going exclusively to large corporations and public works projects. “From where I sit it’s been very disappointing to see the [slow] pace of the stimulus money and to see how restricted it is,” Coakley responded. “My focus on the stimulus money is to make sure it goes where it should” and to see that distribution of the funds isn’t mired in paperwork and graft. “It’s an example of big government trying to do big things and not necessarily being effective,” she said, but added, “I don’t know how much discretion we have” to channel the funds to small businesses or players other than those identified in stimulus legislation.

Early into the discussion, attendees raised the controversial issue of noncompete agreements in employment contracts in Massachusetts. Noncompetes (as we’ve written) are seen by many local companies as an essential way to protect trade secrets, but they’re seen by many entrepreneurs and investors as an impediment to employee mobility and innovation. Coakley said …Next Page »

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[Editor's Note: Bijan Sabet of Spark Capital has kindly allowed us to cross-post this entry from his blog reacting to news today of a draft bill proposing compromise language on noncompete agreements in Massachusetts.]

My partners and I have been pushing to end the use of employee non-compete agreements for some time now.

We passionately believe in this issue and back in late 2007 I wrote that we should end these non-compete agreements. We planned on starting with our firm and then encourage our portfolio companies, entrepreneurs and other VCs to end this practice as well.

A few months later I wrote a guest post on GigaOm and also we started the Alliance For Open Competition. The idea was to start a grass roots effort to get rid of these things (n.b. we believe in protecting employers through the use of non-disclosure agreements, non-solicitation agreements and intellectual property governed by patent law). We were thankful that in a relatively short period of time prominent investors and entrepreneurs joined the cause and started speaking up.

Recently the Boston Globe Sunday Editorial took on this issue in their column—”Clause For Concern.”

I was pleased earlier this year when I was contacted by Rep. Brownsberger who was leading an effort for reform on this issue. Rep. Brownsberger and a team created House Bill 1794 which as originally drafted would give employees and employers the same protections that exist in California. I participated in a few sessions and was thrilled with the leadership of this bill. As a result our firm, Spark Capital formally endorsed this bill. I have huge respect and admiration for Representative Brownsberger.

Sometime over the last week or so that bill was modified significantly. The revised draft is on Rep. Brownsberger’s website. In our view, the revised changes won’t solve the problem in our humble opinion because they simply don’t go far enough to reform and create real change.

Here’s the principle changes they made last week:

1. Employees who make under $50k are free of non-competes. If you make more than that you are subject to a non-compete.

2. The revised draft requires that employers give advance notice that they will require non-competes in their offer letter.

3. Punish overreaching by employers by awarding attorney fees to the employee whenever an agreement is reformed or found unenforceable.

* * *

My reaction:

1. I don’t understand or agree with this new threshold of $50k/year. It will leave out plenty of entrepreneurs and employees.

2. The advance notice doesn’t help if every Massachusetts company requires non-competes.

3. Point #3 puts a huge risk on the entrepreneur/employee on the expense front. Who wants to fund a lawsuit? Even if it’s frivolous. Legal fees are expensive and they create a …Next Page »

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A new draft bill that would limit but not outlaw noncompete agreements in employment contracts in Massachusetts is being floated by two members of the state’s House of Representatives.

The bill combines elements of separate bills introduced earlier this year by Representatives William Brownsberger of the 24th Middlesex district and Lori Ehrlich of the 8th Essex district. Brownsberger told Xconomy this morning that the new bill is intended in part to head off objections among business leaders to his earlier bill, which would have outlawed noncompete agreements altogether.

Many employers in the state believe that noncompete agreements are needed to keep employees from leaving with company secrets and starting directly competitive businesses. Some venture capitalists and technology executives, on the other hand, argue that the agreements punish budding entrepreneurs and harm the local economy, by forcing employees either to stay with their current companies and forego starting new ventures, or to abandon Massachusetts for places like California, where noncompete agreements are unenforceable.

The compromise bill, which adopts much of the language in Ehrlich’s first bill, will likely be heard by the House Committee on Labor and Workforce Development this fall. Unlike Brownsberger’s original proposal, it allows companies to require workers to sign noncompete agreements as a condition of employment. But it creates incentives for employers to limit the terms of these agreements to 6 months, down from the 12 months in typical employment contracts today. It also cuts out restrictions that judges in contract dispute cases might see as overreaching—and it automatically awards attorneys’ fees to employees in such cases.

For employees who make less than $100,000 a year but more than $50,000, the bill limits the acceptable rationale for enforcing noncompete agreements to just two: protecting trade secrets or confidential information. And for employees who make under $50,000 a year, the bill makes noncompete agreements unenforceable for any reason.

At this point, Brownsberger’s earlier blanket proposal to outlaw noncompete agreements—a proposal endorsed by a coalition of venture capital partners, company executives, and industry associations—would seem to be dead in the water. But the new proposal would still bring significant changes to Massachusetts employment law, and probably has a much greater chance of surviving the coming legislative debate.

“We got a very positive response [to the earlier bill] from the VC community and from employees who had had bad experiences, but we got a very negative response, particularly from smaller businesses and many of the smaller high-tech companies,” Brownsberger says. “Companies are very emotional about this issue and feel very strongly that we were taking away from them protections that are vital to their survivability. So we listened carefully to those concerns and attempted to craft a bill that would improve the venture climate, provide employees with some real relief from overreaching noncompete agreements, yet at the same time allow businesses—particularly small businesses—to protect what they feel is vital to their survival.”

The Brownsberger-Ehrlich bill appeases employers by preserving most of the existing legal levers available to them when enforcing noncompete agreements in court. A noncompete agreement should be seen as valid, the bill says, whenever it’s needed to protect an employer’s trade secrets, confidential information such as product development plans and marketing strategies, or “goodwill,” meaning customer relationships.

But there are exceptions in the bill: the goodwill argument can’t be applied to employees making under $100,000, and employees making under $50,000 are exempted altogether. To keep employers from imposing draconian terms, the bill would award attorney’s fees to employees in any cases where a judge finds that the employer has overreached. And the bill explicitly scraps a legal argument sometimes used to keep ex-employees from going to work for competing companies, even in the absence of a signed noncompete agreement: the “inevitable disclosure doctrine,” under which courts presumed that any departing employee would betray trade secrets.

“What we’ve done in the final legislation is give employers very strong incentives to draft only the most reasonable noncompete agreements,” says Brownsberger, who represents a district including Belmont, north Cambridge, and east Arlington. What’s considered reasonable? The bill spells that out, too: “Number one, they can be no more than 6 months in duration,” Brownsberger says. “Number two, …Next Page »

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On snowy days in certain neighborhoods of our great city it is not unusual for someone to put an old trash can in an on-street parking space that they have recently cleared. We all know there is threat implied: if you take the spot, you will regret it. Given the effort expended to clear the spot, the person who did all the work may feel justified in blocking others from taking it. But we all know that this tends to screw things up for everyone. Pretty soon cars circling looking for parking spaces clog the roads, and nobody can get home, even if they have blocked a spot.

This is a textbook example of the classic “tragedy of the commons” problem, in which following our personal self-interest eventually screws things up for everyone.

I believe the use of non-competes falls into the same category. By laying claim to our best employees, and keeping them from working for others, our economy becomes less agile, many of our best employees get tied up in what may not be the best job for them, and their only option is to move to a state that prohibits non-competes.

Don’t get me wrong. I use non-competes in my business, and nearly everyone else I know does, too. Non-competes are in our individual self-interest. The problem is just that they probably aren’t in our collective interest.

In states where non-competes are unenforceable, such as California, we know from our brethren there that employees rapidly gain experience, moving from company to company in quick succession. One of the results of this is that the best people quickly flock to the best companies as they start to show promise. This may be one reason that the world’s tech powerhouses like Google and Cisco disproportionately come from California.

While one could argue that banning non-competes hurts California companies individually, empirical evidence seems to suggest that the system benefits to society collectively outweigh this. In addition to the observation that the Googles and Ciscos of the world tend to grow more commonly in California, it also appears that investors are most happy to put their money there. Venture capital investment there has grown much faster there in the past decade than it has in Massachusetts, reaching a level now that is about three times that of Massachusetts.

This problem is not just theoretical. It is practical, and personal. Twice in the last few months, I have seen cases where great employees were prevented from working for the company that could make the best use of their talents. In one of these cases, the current employer was effectively out of business, although not yet legally dissolved, and for reportedly emotional reasons suggested it would litigate if the employee in question moved to a healthier company in the same industry. This scared off the new employer, who simply didn’t want the legal risk. The employee had to switch industries to take a new job.

Years ago, one of our executives left my employ at Cambridge Innovation Center. I was somewhat concerned that he would help others compete with us, and I reminded him of his non-compete. Not long after, I learned he had moved to California. While this may have benefitted my firm, it was clearly not good for Massachusetts.

I believe movement from company to company is a form of innovation pollination, and we should encourage it. It is time for our lawmakers to ban non-competes.

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Led by the Bay State’s strong healthcare sector, Massachusetts startups attracted just over $145 million in investment in June. That’s the tally from our new partner, ChubbyBrain, a New York-based information services company developing tools for investors, startups, and aspiring entrepreneurs.

Health care companies—spanning drug development, medical devices, and consumer health and wellness—were the focus of 9 of the 17 deals done during the month. But the investment activity ran the gamut from telecommunications and semiconductors to social media and online marketing.

Leading the pack in terms of dollars raised was Cambridge-based biopharmaceutical company Aileron Therapeutics, which pulled in $40 million in a Series D round led by GlaxoSmithKline and Excel Medical Ventures. But that still left more than $100 million for the remaining 16 deals spotted by ChubbyBrain, 14 of which were, like Aileron, venture investments, and two of which involved debt financing. Notably, with all the recent talk (including at the Xconomy Summit on Innovation, Technology, and Entrepreneurship) about early stage deals going by the wayside, 6 of the 15 venture financings were Series A rounds.

The complete June deals list is below. But here are a few other observations from the ChubbyBrain data:

—The most active area venture firm was Polaris Venture Partners of Waltham, MA, which took part in a trio of deals. Flagship Ventures, the Massachusetts Technology Development Corporation, and Baird Venture Partners were in two deals apiece.

—Of the 9 healthcare deals, four involved medical device companies.

—Not a single deal involved cleantech or energy. That is consistent with a nationwide falloff in cleantech investment in the first quarter noted by the National Venture Capital Association.

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