There’s probably nary a Web entrepreneur who hasn’t had a forehead-slapping “Why didn’t I build Groupon?” moment at some point in 2010. Well, I had an experience like that this week, reading Devin Friedman’s superb article “The Viral Me” in the December issue of GQ. It’s all about the Y Combinator venture incubator in Mountain View, CA, and the peculiar species of brash, young, hyper-optimistic entrepreneurs who build companies there. Given that I know most of the startup founders Friedman talked with—heck, I’ve profiled a bunch of their companies—I’d like to think I could have written a piece that good.

I urge you to read it for yourself. But it’s even longer than most of my articles, so I’ll summarize the point that I thought was most perceptive. It was about friction. The entrepreneurs Friedman hung out with, such as DailyBooth CEO Brian Pokorny, talked about how they strive to build Web services that are frictionless—that is, very easy to join and use—or that even have a kind of negative friction, so that it becomes harder to not use them than to just give in (e.g. Facebook).

Friedman dutifully lists the merits of frictionlessness, but toward the end of the piece he cleverly turns the idea around. He suggests that most young Silicon Valley entrepreneurs seem so happy about what they’re doing precisely because of friction: they’ve been given the resources to build stuff, “and the act of creation is maybe the most frictive thing going.” From this point of view, you need a certain amount of difficulty to keep life interesting; otherwise, nothing would be a challenge.

(As a quick side point, there may actually be a benefit to preserving friction on the Web, too. Andres Glusman, vice president of strategy at New York-based Meetup, told me recently that his company actually saw an increase in usage after it added a checkbox to its group creation page saying “I pledge to create real, face-to-face community.” The added step seemed to cause users to slow down and think about why they really wanted to use Meetup in the first place.)

Now, what happens if you take this idea of friction up one level, from the things technology entrepreneurs build to the environments they’re building in? I’ve asserted in this column before that the geography isn’t such a big issue anymore for startups, since cash, talent, and the other resources fueling innovation are increasingly liquid. And I still think that’s the direction things are going. But by my argument, you’d be able to build a tech startup in Fargo, ND, just as easily as you can in Mountain View—which clearly isn’t yet the case.

From Friedman’s point of view, the only way to make Fargo as attractive as Mountain View—the only way to massively scale up Silicon Valley, in other words—would be to remove all friction from entrepreneurship. But not only is this impossible, it would defeat the whole point of being an entrepreneur. You need some friction to keep things interesting, and to weed out the bad ideas. The question is how much.

And that’s the point I want to riff on today. Because Xconomy observes key innovation hubs so closely, we’ve got a fair amount of data, at least of an anecdotal sort, about what’s working for technology entrepreneurs and what isn’t. My own sense is that in New England, where Xconomy was born, startup founders encounter too much friction. In Silicon Valley, by contrast, they probably encounter too little.

Let me expand on both points. I spent three years covering the innovation scene in Boston before moving to San Francisco last summer. So I know there’s an ongoing discussion among entrepreneurs, investors, and government officials about how to strengthen the ecosystem supporting Massachusetts technology startups and how to keep young entrepreneurs from fleeing to Silicon Valley. There have been positive developments—for example, the MassChallenge startup competition, the opening of Kendall Square’s Venture Cafe as a community hub, and the Boston Regional Entrepreneurship Week effort (which actually spread across most of October). But these changes haven’t plugged the startup leak.

The latest case is RelayRides, a car-sharing service that was born earlier this year in Cambridge, MA, and won the $50,000 grand prize in the MassChallenge competition in October. The startup revealed this week that it’s moving to San Francisco, having secured an undisclosed amount of … Next Page »

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Everyone in the innovation community knows entrepreneurs and big companies alike are hard at work across New England building the next economy. But tomorrow, at XSITE 2010—the Xconomy Summit on Innovation, Technology, and Entrepreneurship—we are bringing together some 50 companies and 30 startups, and a host of VCs, angel investors, and innovators from around the region and our network, to celebrate and examine those efforts firsthand.

X Prize Foundation founder Peter Diamandis, Rod Brooks, co-founder of iRobot and now Heartland Robotics, Richard Pops, chairman of Alkermes, Ethernet inventor Bob Metcalfe, Eric Giler, CEO of wireless power startup WiTricity, and Steve Hall, managing director of Vulcan Capital, Paul Allen’s venture arm, are just some of the headliners. Around them we have assembled an incredible group of entrepreneurs, investors (the rise of angel investing in New England is the focus of John Landry’s Angel Tsunami panel), and large company executives who are creating the future of computing, biotech, mobile health, and energy.

The programmed part of our day will end with our XSITE Xpo, where 12 innovative startups—four each from IT, energy, and life sciences—strut their stuff for our audience, and you, that same audience, vote on the winners. This year, chief correspondent Wade Roush will personally wield his iPad applause meter to gauge the audience reaction and choose the winners! That, of course, will be followed by a great networking reception (we have plenty of those built into the day as well) in the Babson pub—all ending in plenty of time to go watch the Celtics win the NBA championship.

It all starts at 8:15 am tomorrow morning (there’s a continental breakfast beforehand) at Babson College, in Wellesley, MA.

You can find registration information and the full agenda here. Sign up now, it is your last chance to save on the walk-in price. We hope to see you there!

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It’s official. As we have been telling folks informally, and as reported last week in the Boston Globe, Xconomy chief correspondent Wade Roush is heading west to become editor of Xconomy San Francisco, which officially launched today. Wade, who has been working out of our Kendall Square offices since just after the launch of Xconomy Boston in June 2007, has become a legend in the New England innovation community for his great writing and reporting, and widespread knowledge of all things tech (and a lot more). He, of course, will be sorely missed. But we are extremely excited to have him open such an important new office in the world’s biggest hotbed of innovation.

But for those who fear Wade’s loss will leave a big hole in the coverage of New England’s innovation scene, take heart. For one thing, Wade will not stop writing about the region entirely. He will keep his finger on the pulse of things near and dear to him, such as Boston’s remarkable mobile technology scene. But, more importantly, moving here as Editor of Xconomy Boston is Greg Huang, our Seattle Editor since the inception of Xconomy Seattle in June 2008 (do you get the feeling that Junes are big for Xconomy?). As part of the move, Greg is also being promoted to National IT Editor. He is deeply knowledgeable in things tech himself (read on for his exemplary bio), and he has carved out a special expertise in venture capital, software startups, and big tech company strategy (think Microsoft and Amazon) as well. He has a different style from Wade of course—but I can’t think of anyone better on the planet to replace our intrepid chief correspondent. In fact, when he joined us in 2008, we were so worried that people might confuse him for Wade, we took the above picture: click on it for a larger version. New England is going to love him!

The moves really mark a return home for both Wade and Greg. As I mentioned in my post this morning about our San Francisco launch, Wade spent nearly a decade in the Bay Area before joining Xconomy here in Cambridge, MA. And Greg’s ties to Boston go way back. He has a Master’s and PhD in electrical engineering and computer science from MIT (Wade’s PhD is also from MIT, in the history and social study of science and technology—so we are trading one MIT doctor for another). Before seeing the light and becoming a journalist, Greg conducted research at MIT’s Artificial Intelligence Lab, and he has published 20 papers at conferences and in scientific journals. I helped him take the plunge into journalism in 2002. He joined Technology Review as an intern when I was editor in chief, and rose to senior writer. He later became a features editor at New Scientist magazine—also working out of Cambridge. Greg and I co-wrote Guanxi, our book about Microsoft in China, which was published in 2006. So we have worked together all over the world, in a sense. I am extremely excited to have him back in Boston. You can find more about him here.

One more thing: Greg also plays bass in an incredible band based out of Boston, Honest Bob and the Factory to Dealer Incentives—so he will be reunited after a long road tour! Honest Bob, by the way, was founded by a couple of guys who now work at Harmonix and Cognex, and has been identified as one of the original inspirations for our annual Battle of the Tech Bands. So Greg is, um, literally plugged into the Boston innovation scene.

Wade will still be around Boston for much of June, as he is an integral part of XSITE 2010 (the Xconomy Summit on Innovation, Technology, and Entrepreneurship), our big conference this Thursday (get your tickets here!), and as he prepares for a cross country drive later this month. Greg will be in town tomorrow night through June 23, and will also be at XSITE. He will then return briefly to Seattle before moving to Boston permanently in July. We plan a party for Wade and Greg next Tuesday-so mark your calendars and stay tuned for details.

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This month a group of 50 clean energy CEOs, investors and executives from New England traveled to Washington D.C. to deliver a common message to our leaders in the nation’s capitol: comprehensive energy and climate legislation is critical for building the clean energy economy here in New England and across the United States. The Kerry-Lieberman ‘American Power Act’ has the potential to kick-start our shared vision for the nation’s future. It draws upon many elements of the House’s Waxman-Markey legislation and Senate’s Cantwell-Collins proposal to deliver the market signals that will accelerate private sector investment, speed the transition to a clean, sustainable energy future, and create millions of quality jobs in the U.S. And, as we watch the situation unfold in the Gulf of Mexico and are reminded of our dependency on oil, it couldn’t have come at a more critical juncture.

New England and its business leaders have the ability to effect change. The clean energy sector already includes more than 2,000 Massachusetts companies and 26,000 jobs. It is the fastest growing industry in the region. Clean energy may be the largest opportunity we have ever had to grow new companies, create new jobs and build thriving regional and national economies. However, the clean energy industry in New England is different from its predecessors—textiles, computer hardware and software, Internet business – in scale, timeframes and the amount of investment required.

By now, many of us have heard the numbers. Energy is a $6 trillion global industry that will grow by tens of trillions of dollars during the next 30 years. But clean energy involves capital-intensive manufacturing or projects that produce commodities such as fuel, electricity or clean materials. This combination requires an alignment of policy and public-sector investment with private capital and entrepreneurial activity. The market dictates that company growth and jobs will disproportionally be placed in regions with clear, long-term policies, pricing signals, and a willingness to adopt early.

New England already has some of ingredients to drive private investment. Regional policies such as RGGI (the Regional Greenhouse Gas Initiative), state Renewable Portfolio Standards, advanced building codes, utility energy efficiency programs, and other initiatives have contributed to the growth of the sector. Massachusetts clean energy companies have brought in $1.1 billion in venture capital and private investment deals from 2007-2009, trailing only California, according to Bloomberg New Energy Finance data and a recent Clean Edge report.

Despite our progress, a recent Pew Charitable Trusts study concluded that in 2009, China invested twice as much as the U.S. in clean energy—$34.6 billion versus $18.6 billion. In addition, in relative terms, the UK invested three times more than … Next Page »

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Longtime readers of Xconomy may have noticed, to our embarrassment, that our Boston Resources page has been “coming soon” for months. Many months. But good things come to those who wait, as they say, and now we’re ready to introduce a resources section that we’re really proud of, the X Lists.

We believe that the X Lists are the most comprehensive collection of resources for New England technology innovators and entrepreneurs anywhere on the Web. We’ve organized them to parallel the stages in a startup’s growth: Start, Fund, Network, Work & Grow, and Analyze. In the lists, you can learn about the local incubators and business plan competitions that can help get your company off the ground, the angel groups and venture firms that can boost you to the next level, the co-working spaces where you can set up shop, the legal firms ready to help you with contracts, the events and technology organizations where you can meet peers (and perhaps customers), and much more.

If you’re looking for a job, the X Lists also include links to information about employment options around Massachusetts. If you’re wondering about the health of the local innovation ecosystem, we’ve got links to Xconomy’s most data-rich stories on venture financing deals, clusters of innovative startups, and the prospects of local biotech businesses. If you think your company might merit an investment by a local economic development agency or quasi-governmental entity, we’ve got a list of alternative financing organizations.

And as an added bonus, the X Lists home page includes a live feed of Twitter posts from dozens of the most interesting people in the Boston technology, startup, and investing communities.

So please—go and explore. The X Lists are very much living documents, and we’re committed to growing them and keeping them up to date. But we need your help to do that—so if you know of a resource or an organization that’s missing from our lists, let us know at editors@xconomy.com.

As for the Resources pages on our San Diego and Seattle sites? Those are…coming soon.

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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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This is it. After two months of all-out effort here at Xconomy, we are just about ready to rock and roll with XSITE 2009 at Boston University. The event starts first thing tomorrow morning, so we are down to the wire. We have over 350 people registered and fewer than 20 tickets left (get yours here). And we very much hope to see you there for a day focused on innovation in New England. “The Recovery Starts Here” is our motto, and we believe it.

There are fabulous keynote speakers like Dean Kamen and Juan Enriquez, and plenary panels that include Innovating Early Stage Venture and Meet the Innovators, featuring some of New England’s visionary entrepreneurs and innovators. Then come the breakout sessions on strategies for bringing energy innovations to market, how IT is transforming healthcare, and Boston’s little-known digital entertainment cluster (one of Wade’s favorite topics, which is why he’s the moderator).

And that’s just a sample of the day’s festivities. Other highlights of the day include:

—a special video update on Terrafugia’s roadable aircraft
—the XSITE Xpo, rapid-fire presentations from a dozen of New England’s leading startups, each with the potential to transform their fields
—two stealth company debuts
—a series of special announcements from attending companies

And then, of course, we’ll party, as the day will wrap up with a networking reception for all attendees. Hope you’re among them!

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Let’s say you live in Boston and you’ve just hit on a great concept for a cross-media property, with all the attendant merchandising tie-ins: a special-effects-laden movie, a console video game, a comic, a kids’ cartoon, action figures, a novelization, a persistent online world—in other words, the next Matrix or Transformers or Harry Potter. To make it happen, you’d probably need to hire filmmaking talent from Hollywood, writers and publishers and marketers from New York, programmers and game designers and media network providers from San Francisco and Seattle and Los Angeles, and so forth, right?

Actually, no. Most, maybe all, of the talent and technology you’d need to build your dream media empire is right here in New England.

While the rest of us weren’t looking, and without consulting one another, thousands of creative types have been flocking to the Boston area over the past decade. They’ve built a critical mass of game studios, film production companies, graphics software houses, 3-D modeling companies, digital marketing agencies, online hangouts, and the like—what amounts, in fact, to a self-sufficient digital entertainment ecosystem.

Of course, there would be no particular reason to build your media property using only New England talent. You don’t get green laurels or political-correctness points for restricting yourself to creative services from within a 100-mile radius, the way you arguably do if you buy locally farmed food. And in an age of Friedmanian flatness, your investors will probably force you to offshore as much of the work as you can anyway. My point is that you could find the services here if you wanted to. And that’s something new and remarkable.

We’re going to explore this emerging sector in depth during a panel discussion that I’m moderating on June 24 as part of the Xconomy Summit on Innovation, Technology, and Entrepreneurship. (This full-day event, featuring more than 50 speakers altogether, will be held at Boston University’s School of Management; the full agenda is here and registration information is here.) My panel is entitled “The Digital Entertainment Cluster: Boston’s Best Kept Secret,” and I’ve lined up participants from local companies and organizations that represent the whole spectrum of digital media production and delivery. Not coincidentally, these are all companies I’ve written about for Xconomy—just follow the links below to go deeper.

First, we’ll have Brett Close, CEO of Maynard, MA-based 38 Studios, which was founded by local baseball hero Curt Schilling and is building a cross-media property very much like the hypothetical one I outlined above; it’s based around a massively multiplayer online environment with the cheeky code name Copernicus. Then there’s Chris Gardner, chief marketing officer at Newton, MA-based Extend Media, which sells software that media companies can use to distribute a single piece of digital content to multiple devices, including PCs, televisions, and mobile phones.

Kyle Morton, vice president of product at Cambridge, MA-based EveryZing, will also be on hand; EveryZing is a spinoff of local engineering powerhouse BBN, and has turned its original speech-to-text technology into the core of a universal search engine that helps media companies catalog the digital content they own, facilitate consumer access, and monetize it through advertising. We’ll also hear from Brian Shin, the CEO of Boston-based Visible Measures, who will talk about his company’s project to index and track all the world’s viral videos, the better to help clients measure the success of their marketing campaigns.

Finally, we’ll be joined by Jason Schupbach from the Commonwealth of Massachusetts’ Office of Business Development, who has the coolest title of all the panelists: “Industry Director, Creative Economy.” Schupbach’s job is to connect people in the creative industries to the extensive resources offered by the state government. He’s one of the main people in the Patrick Administration promoting services like export planning, equipment loans, affordable housing programs for artists, and the 25 percent film tax credit. (That tax incentive, available to anyone who creates at least 70 percent of a film or digital media project in Massachusetts, is one of the main forces behind the state’s sudden emergence as a film-industry outpost; no fewer than four major movie studios are planned for construction in Massachusetts over the next two years.)

I’m very excited (or XSITEd, as we’ve been saying around here all month) to be gathering these particular panelists at one event, because I think they can tell a compelling story about why it’s useful to have so many elements of the digital media production and distribution pipeline available in one place; why Boston is an attractive place to build a digital media company; how having all of this talent in one place creates opportunities for projects that weren’t … Next Page »

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We are incredibly excited about XSITE 2009—The Xconomy Summit on Innovation, Technology, and Entrepreneurship happening next Wednesday at Boston University—and we are especially pumped today because we have just filled the last open speaker slot for the event.

The more than 50 organizations participating in the event, listed below in alphabetical order, come from all corners of the New England innovation ecosystem: universities, startups, large public companies, non-profits, research institutes, life sciences, computing, semiconductors, telecom, medical devices, energy, cleantech, you name it. We are extremely grateful to all the participants, who have jumped in to help make this one of the cornerstone events of New England Innovation Month.

See the agenda for a complete list of speakers and panelists, and check out www.xsite2009.com for all the updates as the event approaches. With just a week to go, and the Saver registration rate set to expire today, it’s a great time to sign up for XSITE, which you can do here. We hope to see you next Wednesday.

XSITE 2009 participating organizations:

Adimab
Alnylam Pharmaceuticals
Atlas Venture
Boston-Power
Boston University
Boston University School of Management’s Institute for Technology Entrepreneurship and Commercialization
CareGroup Health System
Cliniworks
Cloudswitch
Dartmouth University
DEKA Research & Development
EMC
Excel Medical Ventures
Extend Media
EveryZing
FIRST (For Inspiration and Recognition of Science and Technology)
Flagship Ventures
Flybridge Capital Partners
FloDesign Wind Turbine
Founder Collective
General Catalyst Partners
GlaxoSmithKline
GlycoFi
GreatPoint Energy
Harvard Medical School
Highland Capital Partners
IBM
IST Energy
Kepha Partners
Kiva Systems
Massachusetts Institute of Technology
Massachusetts Office of Business Development
Microsoft
NaviNet
New England Venture Capital Association
Partners Healthcare Center for Connected Health
Pulmatrix
Renewable Energy Business Network
Satori
Seventh Sense
SiOnyx
Sirtris Pharmaceuticals
Skyhook Wireless
Solventerra Energy
StyleFeeder
Terrafugia
1366 Technologies
38 Studios
Verenium
Visible Measures
Wakonda Technologies
WiTricity
Xconomy
Zafgen

Plus two unnamed stealth companies

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New England technology and business newspaper Mass High Tech is moving from a weekly to a biweekly print publishing schedule effective in September, publisher Michael Olivieri said yesterday. The Boston Globe reported that MHT laid off four employees in the restructuring, which will see the paper shift from 24 pages a week to 32 pages every two weeks. In the story in MHT, Olivieri described the change as a natural step in enhancing the “web emphasis we have been working toward for some time.”

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There are three weeks and one day to go before XSITE—the Xconomy Summit on Innovation, Technology, and Entrepreneurship, which we are holding at Boston University on June 24—and we are pumped. We are finalizing the agenda, and have added a host of fantastic new speakers, including inventor extraordinaire Dean Kamen. We’re also putting the finishing touches on some great panels that uncover some of the incredible strengths (many of them underappreciated) of New England’s innovation community.

We are pleased to be part of Innovation Month in New England, and hope XSITE 2009 will serve as a great anchor for the month by devoting a full day to innovation and bringing together key players from across the innovation spectrum. Speakers at XSITE will include leading executives from EMC, IBM, Microsoft, Alnylam, and Sirtris/GlaxoSmithKline, as well as top entrepreneurs such as Yet-Ming Chiang of MIT and A123Systems; Tillman Gerngross of Dartmouth, GlycoFi, and Adimab; Mick Mountz of Kiva Systems; and Christina Lampe-Onnerud of Boston Power (who just announced ambitions to build a 600-employee battery plant in Massachusetts). And we’re very excited about keynote speakers Juan Enriquez of Excel Medical Ventures, and, of course, Dean Kamen.

And for those of you who want to drill down into one of New England’s most vibrant innovation sectors, XSITE’s afternoon breakout sessions will offer you three to choose from. Our chief correspondent, Wade Roush, will host a session on Boston’s little-known—yet highly influential—assembly of digital entertainment and media firms: The Digital Entertainment Cluster: Boston’s Best-Kept Secret. It’s a topic near and dear to Wade’s heart, and sure to spark some lively discussion. Atlas Venture’s Jeff Fagnan, meanwhile, will provide a tour of what we’re calling The Health 2.0 Hub, the local people, institutions, and companies that are using innovations from IT to transform healthcare, from bench side to bedside and beyond. And energy innovators, executives, and investors will come together in a third session—Getting Energy Innovations to Market—to talk about what it takes to translate and scale new ideas in solar, wind, batteries, grid management, and energy efficiency into market realities.

The up-to-date agenda is here—sign up soon because early bird registration ends tomorrow. Also, when you sign up, please take our quick survey about the economy—we want your views on when it will improve, and which sectors will lead us out of recession. We will be revealing your predictions at XSITE.

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Old places can accomplish new things.

Boston and Tokyo are both about 400 years old. Yet we’re different when it comes to planning for the future. Not long ago, Tokyo finished building a new island in its harbor, and a new city on that island, complete with a subway system that runs without human intervention. The goal? Explore what its future might look like by building “a showcase for future living.”

Closer to home, Toronto recognized a few years ago that it was losing ground in the sciences, so it deleted two-square kilometers of its downtown and replaced it with the Mars Discovery District, a vast collection of intertwined university research facilities, commercial research space, and the best biotech incubator space I’ve ever seen—and I’m an incubator guy.

Tokyo and Toronto prove it’s possible for places to set ambitious goals and achieve them.

Recently, at the Nantucket Conference, I interviewed a successful Boston-area CEO who reminded me that smart organizations think long-term. With sales of over $500M, Robert Keane’s 15-year-old Vistaprint dominates its sector. Yet he remarked, “We are a young company. This is the beginning of the Vistaprint story. Our management’s perspective is decades, not years.”

Greater Boston should take a page from Tokyo, Toronto, and business leaders like Robert Keane, and dedicate energy to thinking long term and thinking big.

Let’s not kid ourselves: we haven’t been doing this lately. Other than putting a car tunnel underground and creating a ‘subway line’ that looks suspiciously like a bus service, I can’t think of much we’ve done in the past 20 years that one could fairly describe as BIG.

Visions for our future in the Boston area will not be handed to us on a platter by President Obama, or anybody else. We need to craft them ourselves. It is time we began a dialogue about what we would like to accomplish together. I invite Xconomy readers to share here their personal grand visions for our future. What should we set our sights on?

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There is a lot of great stuff going on in Boston right now. Granted, there are still many signs of paralysis throughout the system, but there are also many high-quality entrepreneurs in the marketplace attempting to change the world with exciting, innovative solutions to some very large problems.

June 2009 has been dubbed “Innovation Month in New England,” so I thought I would tick off some of the investment themes we are excited about today.

* My favorite theme is the convergence of IT and life sciences (we dub it “technology for healthcare”), as that manifests itself in smart devices, important advances in healthIT, and the promise of personalized medicine and sophisticated diagnostics. The parallel developments in bio-informatics, computing power, material sciences, microfabrication, power management, and imaging modalities have dramatically advanced our ability to diagnose, manage, and cure many chronic diseases. I am particularly intrigued with the “connected health” paradigm—and who will be the winners and losers as this model becomes a reality.

* I am spending a lot of time with robotics entrepreneurs these days. There are exciting and very obvious applications in the industrial, manufacturing, medical, and consumer markets. And Massachusetts has a world-class robotics ecosystem already in place.

* Developments in mobile applications as well as wireless infrastructure are very exciting.

* We are seeing a number of important consumer infrastructure opportunities which will better optimize the allocation of advertising dollars and improve marketing efficiencies. We are particularly excited about advances in video infrastructure and distribution.

* Tech-enabled business services, particularly in the financial services industry, show great promise. Banks and insurance companies simply need to be more efficient in how they do business.

* We still see compelling opportunities in the enterprise software space, although admittedly fewer than in years past.

* Since 9/11 we have observed that the government—on a massively parallel basis—has been subsidizing numerous technologies in the name of homeland defense through non-dilutive grants and contracts. We have been pursuing an investment thesis which is centered on the ability to redirect some of these technologies to large industrial or commercial applications.

* We have been pursuing a number of exciting opportunities in the platform semiconductor space, which drives many of our other investment themes above.

* And lastly—and most recently—we elevated cleantech as a new investment theme. We do so cautiously, recognizing the many challenges these companies now face. Our principal focus is on demand-side energy management, which is more akin to business models found in the above themes. We have avoided supply-side, generation companies, which require extraordinary amounts of capital, have very significant technical risks, uncertain business models, and extended development timelines.

We are always happy to engage with great entrepreneurs, particularly if they are focused on some of the themes above. Several important events in June will take on these issues, including the Xconomy Summit on Innovation, Technology, and Entrepreneurship, or XSITE 2009, an all-day conference at Boston University on June 24. Many of these themes will also be discussed at an event Scott Kirsner is hosting on June 25, also at Boston University. Please come and join in the debates.

[Editor's note: This column also appears, in slightly different form, on Michael Greeley's blog, On the Flying Bridge.]

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At the Nantucket Conference, an invitation-only gathering of New England-area CEOs, entrepreneurs, venture partners, and select others, first-time attendees get a single blue dot on their nametags. Alumni get another dot for every year they’ve attended, and veterans of five or more conferences get a gold starfish pin.

About a third of the participants at the tenth annual conference, held April 30 to May 2 on Nantucket Island, MA, had one blue dot, including myself (I was one of a handful of journalists invited by the conference organizer, Shayne Gilbert of Future Forward Events). But strikingly—despite the obsession among attendees with the economy’s drastic downturn and its effects on entrepreneurship—several of the starfish people said afterward that it was the best, most energetic edition of the conference they’d been to. It seems that the crisis has inflamed the classic innovator’s itch to get on with business—and to invent new ones.

In past years, the proceedings of the Nantucket Conference were off the record to journalists unless a source explicitly agreed to be quoted. This year, the organizers reversed the policy, so everything was on the record, unless a speaker indicated otherwise—which only happened once the entire weekend, to my knowledge. That meant attendees were free to indulge their social media passions, blogging and tweeting freely (you can see the whole conference Twitter stream here).

It also means I’m able to bring you a few of the main themes from the conference. Though the program included panels on topics as diverse as getting venture funding, robotics, gaming, energy, and the roots of the economic crisis, a few ideas seemed to frame the mood of the conference (and perhaps of the entrepreneurial set in general these days), a mindset I’d call pragmatic optimism. Some of the main elements:

Fundraising is getting harder—especially for new companies, but even for established ones. Michael Greeley, a general partner at Flybridge Capital Partners, pointed to estimates that only 600 new startups will win venture funding nationwide this year, down from 1,171 in 2008. VC firms have become exceedingly cautious, keeping $5 in reserve for every $1 they invest, rather than the more traditional 2-to-1 ratio, Greeley said. Jana Eggers, CEO of Leipzig, Germany-based Spreadshirt, a T-shirt customization company whose North American headquarters are in Boston, said that even though her company is cash-flow-positive, it had a very difficult time raising its most recent round of growth capital. The terms offered by potential funders were “shocking” and were “clearly based on the economy, not on our fundamentals,” Eggers said.

In areas such as robotics where New England has clear strengths, venture capital is largely absent, pointed out MIT roboticist Rod Brooks, a co-founder of iRobot who now leads stealth-mode startup Heartland Robotics. In the energy and cleantech space, according to General Catalyst‘s Hemant Tenaja, money from hedge funds and strategic investors has largely dried up, and the spigots will stay off until Congress and the Obama Administration work out energy and climate bills. And heaven help the startups that need cash quick: Each of Boston-Power‘s three funding rounds took a year to negotiate, according to CEO Christina Lampe-Onnerud. “The best time to raise capital is when you don’t need it,” said Andy Palmer, co-founder of Vertica Systems, former CIO at Infinity Pharmaceuticals, a veteran of Bowstreet (acquired by IBM).

On the other hand, companies need less money—and should probably be lowering their sights anyway. John Landry, a software industry veteran who is managing director at Wayland, MA-based Lead Dog Ventures, used his pulpit as moderator of a panel on “Getting and Staying Funded” to argue that infotech startups “don’t really need a lot of money” these days thanks to technologies like … Next Page »

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The silver lining in the big black rain clouds that were this weekend’s first quarter venture capital investment reports was that New England actually did better than just about anywhere else. As Bruce reported on Saturday, the nation’s venture outlays in Q1 tanked more than 50 percent, to their lowest levels in more than a decade. But thanks to some big deals (see below), led by A123Systems of Watertown, MA, venture investments in the region only slipped 15.5 percent.

That’s the glass half full view, of course. But the New England figures, from Dow Jones VentureSource, showed $594 million pumped into 61 regional deals during the first quarter, against $703 million invested in 83 deals in the same period of 2008. Compare that to, oh, say, the San Francisco Bay Area (which includes Silicon Valley in the VentureSource data). It still led the nation, with $1.14 billion invested in 139 deals. But the dollar figure was 57 percent off the first quarter of 2008, when $2.67 billion was pumped into 254 deals—and Q1 2009 saw the area’s lowest totals, in both dollars and deals, in at least a decade, according to VentureSource.

You can get the full story of first quarter venture investments in Bruce’s account here. But below are the Top 10 New England deals of the first quarter. Seven of the 10 are in healthcare/biotechnology, two (A123Systems and Lilliputian) are in energy and power, and just one, enterprise data protection company Sepaton, in pure information technology.

A123Systems (Watertown, MA) — $69 million
(Investors: GE Capital, GE Energy Financial Services, Conoco Phillips, Detroit Edison, Espirito Santo Ventures, North Bridge Venture Partners, CMEA, Alliance Bernstein, Qualcomm, Sequoia, Novus, and MIT)

Proteon Therapeutics (Waltham, MA) — $38 million
(Investors: MPM Capital, Intersouth Partners, Prism VentureWorks, Skyline Ventures, TVM Capital, Individual Investors)

Still River Systems (Littleton, MA) — $33 million
(Investors: Venrock, CHL Medical Partners)

Aveo Pharmaceuticals (Cambridge, MA) — $30 million
(Investor: Biogen Idec)

Lilliputian Systems (Wilmington, MA) — $27.9 million
(Investors: Altira Group, Atlas Venture, Fairhaven Capital Partners, Kleiner Perkins Caufield & Byers, RockPort Capital Partners, Stata Venture Partners)

Hydra Biosciences (Cambridge, MA) — $22.2 million
(Investor: MedImmune)

Marinus Pharmaceuticals (Branford, CT) — $20 million
(Investors: Canaan Partners, Domain Associates, Foundation Medical Partners, Sofinnova Ventures)

Sepaton (Marlborough, MA) — $15.5 million
(Investors: Focus Ventures, HarbourVest Partners, Jerusalem Venture Partners, Menlo Ventures, Valhalla Partners)

Surface Logix (Brighton, MA) — $15 million
(Investors: Arch Venture Partners, HBM Partners , Intel Capital, MPM Capital, Unilever Technology Ventures, Venrock)

Stemgent (Cambridge, MA) — $14 million
(Investors: HealthCare Ventures, Morgenthaler)

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If you followed the the CTIA convention in Las Vegas this week, then you’ve been steeped in news about things like the Palm Pre, Skype for the iPhone, Firefox’s Fennec mobile browser, 4G services from Verizon and Clearwire, Kindle competitors from Verizon, AT&T, and News Corp., and new application stores for Blackberry, Nokia, and Windows Mobile devices. But just because CTIA ends today doesn’t mean the news will. We’re making some more next Tuesday at Xconomy’s first-ever Forum on the Future of Mobile Innovation in New England.

For this afternoon-long event, to be held at Microsoft’s posh new digs at One Memorial Drive in Cambridge, MA, we’ve put together a stellar lineup of Boston-area wireless executives and innovators from nearly 20 local companies and investment firms. We’ve got people representing the worlds of location-based services (Skyhook Wireless and uLocate), enterprise mobile deployment (Enterprise Mobile), mobile social networking (MocoSpace), iPhone apps (Apperian and FitnessKeeper), mobile marketing and advertising (Quattro Wireless and Jumptap), advanced interfaces (Veveo and vlingo), and venture capital (Charles River Ventures, represented by Jon Auerbach, and Flybridge Capital Partners, represented by Jeff Bussgang, who just blogged about his experiences at CTIA).

Check out the full agenda for all of the speakers and presenters. To sign up to attend, proceed directly to our event registration page.

One can’t-miss highlight of the forum will be a “fireside” chat with Rich Miner, who brought the Android platform to Google and was recently named general manager of the new Google Ventures, and Sandy Pentland, the MIT Media Lab luminary who leads the Next Billion Network for mobile entrepreneurs and has been using mobile digital sensors to study social signaling between people. (Pentland just published a book on that subject, Honest Signals).

Also spicing things up will be a series of live demonstrations of mobile technologies and applications—including the brand-new Bolt Beta 2 mobile browser from Bitstream and the remarkable new Mobile Virtualization Platform from VMware, which allows phones to switch between operating systems on the fly. And as a permanent online supplement to the Tuesday program, we’ve also assembled the Xconomy Mobile Innovation Showcase, which now includes 17 local mobile companies and counting.

So put away your Las Vegas outfits, put on a windbreaker against the chilly New England spring weather, and come on out to see us next Tuesday.

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It’s official: Google has launched a venture investing wing called Google Ventures, and Rich Miner, who is based at the company’s Cambridge, MA, office and is the former leader of its Android mobile operating system project, is one of the managing partners.

A sharp-eyed reporter for Reuters broke the news about Miner’s new job on March 20, after spying a nametag at a Silicon Valley investing event that identified the Android guru as part of Google Ventures. At the time, the company would only tell Reuters that Google Ventures was “a project we’re working on,” with no further details forthcoming.

Last night, though, Google went public with the project, in a company blog post written by Miner and his co-managing partner, Bill Maris, an entrepreneur and former neuroscientist hired by Google to start the fund. Miner and Maris said Google Ventures will make early-stage investments in a range of industries; they mentioned the consumer Internet, software, cleantech, biotech, and healthcare by name, but that added the firm would also invest in “other areas we haven’t thought of yet.”

Coincidentally, I’ve been in touch with Miner recently about next week’s Xconomy Forum on the Future of Mobile Innovation in New England, where he’ll be participating in a fireside chat that I’m moderating. So this morning, I had a chance to ask him a couple of questions by e-mail.

I asked him first whether he will be staying in Boston, and whether he will function, in effect, as Google Ventures’ eyes and ears on the East Coast. Related to that, I asked whether he’s optimistic that the New England area is a fertile place to hunt for young, investment-worthy startups.

“I am staying in Boston as an East Coast partner,” Miner replied. “We think New England is a great place to be. It’s a fertile ecosystem with the right combination of top universities, seasoned entrepreneurs and experienced management.”

I also asked Miner about Google Venture’s areas of emphasis. According to a FAQ published as part of the new Google Ventures website, the fund will not be a strategic vehicle for future acquisitions by Google. But I wondered whether Google Ventures will be putting any special emphasis on investing in companies whose technologies are allied in some way with Google’s oft-stated mission “to organize the world’s information and make it universally accessible and useful.”

“I would not say special emphasis,” said Miner, “but we are able to look at startups with the domain knowledge of Google and we leverage that to help guide our thinking about possible investments.”

I take that to mean that as Googlers, Miner and Maris will be looking at companies through a Google lens—which could mean that startups with ideas about how to improve people’s access to information will have a leg up in the vetting process. But Google also has an increasing range of other interests—including, for example, green initiatives to reduce the company’s carbon footprint, and, through the non-profit Google.org, global health and citizen empowerment.

Numerous press reports, including one today in the Wall Street Journal, have said that Google plans to commit $100 million to the new venture fund. However, last night’s announcement named no specific figures. The Google Ventures FAQ says the company is “able to invest amounts ranging from seed funding to tens of millions of dollars, depending on the stage of the opportunity and the company’s need for capital.”

Why would Google start a venture operation—especially considering, as Bob pointed out last week, that corporate venture wings have a generally mixed record of success? Well, venture investing, with the right dose of skill and good fortune, is still one of the best ways to make lots of money—and the Google Ventures FAQ makes it clear that the fund will be looking for companies with “the potential for significant financial return.”

But as with most Google projects, there seems to be something more at work here—call it a spirit of irreverent inventiveness. “First and foremost, we’re looking for entrepreneurs who are tackling problems in creative and innovative ways,” the FAQ says. And the company clearly believes that its internal intellectual resources in areas like search, advertising, marketing, networking, user-interface design, and fundamental computer science—what Miner calls the company’s domain knowledge—put it in a unique position to scout out and support innovative young companies in similar areas. The fund’s tactical approach, Miner and Maris wrote in last night’s blog post, will be to marry “the best practices of top-tier, financially focused venture capital firms” with “Google’s unique technical expertise and brand.”

The state of the economy may also have been a factor in the founding of Google Ventures. As Miner and Maris wrote in the Google blog, “Economically, times are tough, but great ideas come when they will. If anything, we think the current downturn is an ideal time to invest in nascent companies that have the chance to be the ‘next big thing,’ and we’ll be working hard to find them.”

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On April 7, Xconomy will hold its first-ever Forum on the Future of Mobile Innovation in New England, an afternoon-long event designed to highlight the technologies and ideas that will lead the local mobile industry through—and past—the economic downturn. CEOs, engineers, analysts, and investors from more than 15 local companies and venture firms will be on hand at Microsoft’s New England Research and Development Center to share their insights and predictions and to tackle the audience’s questions. Tickets to the event are available here, but are going fast.

A few weeks ago, we put out a call for demos, inviting local mobile firms to show off their technologies in a series of quick “mobile bursts” punctuating the afternoon’s panel discussions. Time restrictions forced us to pick just five presenters. But so many companies expressed interest in demonstrating their technologies that we hated to turn them all away—so we decided to do the next best thing, and set up a showcase area here on the Xconomy website as a permanent online supplement to the April 7 event.

The companies listed below are pioneers in important niches of the wireless business such as mobile Web browsing, marketing and advertising, recreation and fitness, shopping-related mobile search, and mobile software development. They’re distinguishing themselves by raising capital, bringing out intriguing new products and services, and exploring new markets even as the recession slows investment and innovation in other sectors.

The descriptions below were supplied by the participating companies, with slight editing for length. We’ll be adding to this showcase over the following week. If you’d like us to include your company free of charge, just write to me at wroush@xconomy.com.

Quick Directory:

Adva Mobile
Aerva
Ambient Corporation
Bitstream
Cognika
Enterprise Mobile
Everypoint
FitnessKeeper
Geocade
Jumptap
Localytics
MocoSpace
Nuance Communications
Pongr
Pyxis Mobile
Quattro Wireless
ROAM Data
Skyhook Wireless
uLocate
Vlingo

Adva Mobile provides a software service that enables music artists to create closer relations with their audience through their mobile phones. The services that we provide include mobile messaging, mobile
presence (through mobile webpages), mobile content fulfillment, mobile commerce, and the ability for the fan to share this experience through existing social platforms like Twitter and Facebook. Free to the fan
and free to the band, we make money through mobile ticket and merchandise sales, premium subscriptions, and advertising revenue.

Boston-area band Macalister Drive is an early user of Adva Mobile:

Company video:

Aerva, Inc. is a pioneer in developing interactive mobile technology that integrates mobile applications with the web and digital display networks. Aerva’s dynamic mobile applications platform, MoApp®, allows you to create and manage applications that are compatible with all wireless carriers throughout North America and Europe. MoApp offers opt-in connectivity to subscribers through a variety of media including mobile, print, radio, television, digital out-of-home and more. Used along with Aerva’s AerChannel digital display platform, MoApp adds mobile interactivity to public displays. Founded by MIT alumni, Aerva provides the simplest to use, most powerful and most cost-effective solution to create small or large interactive display networks.

Screen shots of on-screen voting and advertising displays:

Interview with Aerva CEO Sanjay Manandhar

Ambient Corporation (OTCBB: ABTG) designs, develops, and markets Ambient Smart Grid™ communications technologies and equipment. Utilizing proprietary, open standards-based technologies along with in-depth industry experience, Ambient provides utilities with solutions for creating smart grid communication platforms and technologies.

The Ambient Smart Grid platform uses high-speed Internet Protocol (IP)-based communications over existing medium and low-voltage distribution grids as the “last mile” backhaul necessary for utilities to implement smart grid applications such as Advanced Metering Infrastructures, real-time pricing, Demand Side Management, Distribution Monitoring and Automation, and direct load control and more. When combined, these applications can offer economic, operational and environmental benefits for utilities, and ultimately the utility’s customers.

The Ambient Smart Grid™ communications platform is comprised of nodes that are configured to act as individual data processors, and collectors that receive and transmit the communications signal from other networked devices including other nodes, couplers or end-user devices. Ambient’s node can directly interface with any device with a serial or Ethernet port, and can deliver high-speed communications data using existing and developing technologies. Ambient’s latest communications node, the X-3000, has incorporated the ability to access Verizon Wireless’ EV-DO 3G network.

Bitstream (NASDAQ: BITS) is a software development company focused on bringing unique software products to a wide variety of markets. The company’s core software products include award-winning fonts and font rendering software, mobile browsing and messaging software, and variable data publishing and web-to-print software for personalized marketing.

On April 1, Bitstream introduced the Beta 2 version of its Bolt cross-platform mobile browser. Based on the Webkit open-source browser foundation, but with proprietary compression, navigation and rendering technologies, Bolt is optimized to conserve mobile phone battery life and data transmissions while offering unrivaled speed—consistently performing 25 to 50 percent faster than competitors.

Sample screenshots:

Company video:

Preview: Bolt Browser for BlackBerry Beta from CrackBerry2 on Vimeo.

The “search-and-click” paradigm has become the principal mode of information retrieval over the web. Search, while making information available, is far from making it usable. The goal of zooming user interfaces (ZUIs) is to make this information-glut usable as “knowledge” in a simple intuitive fashion. One of the simplest and most intuitive user interface paradigms in existence is that of exploring a map by zooming in/out for details/abstract. Cognika’s eXtensible Interface (XI™) offers the user a mechanism to iteratively access and develop a personalized compendium of the information desired. This customizable compendium—which Cognika terms a “View”—spans multiple domains, documents and media and self-assembles information contextually with which the user can iterate.

We illustrate this using an example of searching for a movie. As with most search engines the results are rendered with an initial summary. However, the user can then click on a result of interest to zoom-in further to view showtimes (based on location) and reviews (from selected sources). On zooming-in further, traffic or public transit information relevant to the closest theater is displayed. The user might then choose to include other facets such as tickets, nearby dining etc. Cognika XI™ also allows for inline expansion of concepts of interest. For example the user might choose to zoom-in further to learn about movies in similar genre by the director, or expand on the plot summary to learn about the context and story.

Cognika XI™ offers a novel, intuitive mechanism for Human Computer Interaction, especially in information-rich environments.

Sample screenshots:

Company video:

… Next Page »

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For entrepreneurs and investors alike, it was a sad day back in January, when Y Combinator founder Paul Graham announced he would stay in Silicon Valley year round and give up splitting his startup incubation activities between Mountain View and Cambridge, MA, where Y Combinator has traditionally held forth each summer. On his website, Graham explained that the change had “nothing to do with startups,” but that he had decided California was the best place to raise his about-to-be-born child. That didn’t stop him from a candid assessment of the Boston innovation scene, however. “Boston just doesn’t have the startup culture that the Valley does,” Graham wrote. “It has more startup culture than anywhere else, but the gap between number 1 and number 2 is huge.”

Since that time, I’m happy to report, Graham’s wife Jessica Livingston (a Y Combinator partner) has given birth to a healthy son, George. And Graham himself is back at work, at least to the point that he hosted an angel investor conference last week. He also took time to answer some questions I had e-mailed him earlier, asking for a more detailed view on the differences between the New England and Silicon Valley innovation cultures. As you will see, he cleverly outmaneuvered me on my last question, about raising kids to be themselves and not to constantly compare themselves with others. But far more important than that, his answers hold some hard truths for Boston area investors and students. He called Cambridge “the intellectual capital of the world,” brimming with ideas. But when it came to Internet investing, entrepreneurship, and even the mindset of students, well, that was another story.

So here are the questions, and Graham’s e-mailed answers, unedited except for clarifying questions, correcting minor typos, and the like. “Sorry if these answers are rather long,” Graham writes. “These are questions I’ve thought a lot about.”

Xconomy: You mentioned in your post that there was a vast difference between No. 1 (Silicon Valley) and No. 2 (Boston). Can you describe some of the specifics behind this observation–how so, why so?

Paul Graham: The biggest difference between Boston and Silicon Valley is the way
startup culture pervades the Valley. The Valley is for startups what LA is for movies. It’s the main thing people care about here. Boston is for startups what New York is for movies. People do make some movies there, but it’s not the city’s main focus.

A lot of other things follow from this. The startup community is much larger in the Valley, large enough that it makes a qualitative difference. Among other things, this makes it much easier for us to run YC [Y Combinator] here. The 4 YC partners aren’t the only ones who advise the startups; we also bring in all kinds of experts from the community to advise them; and it is much easier for us to do this in Silicon Valley because that’s where most of the experts are. When we were in the summer in Boston we were always trying to talk people from the Valley into visiting Boston for a vacation. We managed to talk Paul Buchheit into it. And fortunately Mitch Kapor sometimes comes to Boston in the summer, so we were able to get him. But it was always a stretch.

Another difference is that because the Valley cares so much about startups, people here are always half a step ahead. All the lawyers know what the latest standard terms are for various types of deals. The investors are less frightened by new ideas, because the ideas are less new to them. The founders feel less lonely, because there are three other groups of guys in the same building starting startups.

I love Boston as a town. If I didn’t have kids I’d rather live in Cambridge than anywhere else. Cambridge is the intellectual capital of the world. Really. In fact, a large part of the reason Boston is weak in startups is probably that it’s good at other things. The focus of Boston is ideas, and it seems hard for a city to have two foci.

X: Do you think Silicon Valley’s advantage is more true for the Web-based sector you focus on? Are there areas, perhaps life sciences or medical devices, where Boston might be better for startups?

PG: Boston may well be a better place for biotech and medical startups. Or not; I have no idea. That is a completely different world from the one YC operates in. There’s no room for seed firms there, because the startups are so expensive to start.

X: Even when it comes to Internet startups, are there some things Boston investors or entrepreneurs are better at, or are strong at—maybe more conservative management, say?

PG: Honestly, nothing comes to mind. Occam’s razor says the reason Boston founders … Next Page »

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Here are a few thoughts after listening to the Microsoft earnings conference call. The software giant announced 1,400 layoffs today, with up to 5,000 positions being eliminated over the next 18 months, mostly at its Redmond, WA headquarters. (The company’s New England operations will not be directly affected, according to a Microsoft spokesperson we contacted; see below.) In addition, there will be no pay raises in the next fiscal year. And marketing and facility costs and travel expenses will be cut. All of that will save the company some $1.5 billion in operating expenses.

1. Is it enough?

Granted, it is the largest layoff in Microsoft’s history—and the 5,000 positions doesn’t include outside contractors and the like. But chief executive Steve Ballmer said on the call that “we’ll be adding a couple thousand jobs back, in areas like search.” So the job loss will amount to “more like a net two to three thousand.” As bad as it is, it’s a lot less than what many people were expecting; there were persistent rumors of 10,000 or more getting the axe.

2. Will there be more layoffs?

The worry here is that Microsoft might enact a series of increasingly demoralizing cutbacks if the economy doesn’t turn around in the next year or so. So what exactly is Microsoft basing its cutbacks on, and what are its assumptions about the downturn? “The size and scope of this economic dislocation is unprecedented,” said Ballmer. “Our model is not for a quick rebound. The economy shrinks and rebuilds from a lower base. We’re not expecting a bounce…It will stay down for a year, two years, then start to build back.” It sounds like Microsoft has planned for the next 18 months, but if things get a lot worse, there will be further cutbacks.

3. How will Microsoft retain and attract top talent?

Not giving pay raises is tough on hard-working employees and prospective employees. It’s the kind of thing that could lead to an exodus of top talent from Microsoft—and the Puget Sound region in general. On the other hand, there are fewer positions for departing employees to go to now. Xconomy will be watching closely what the effect of all this is on the Seattle area.

On the New England front, Xconomy was in touch this morning with Catherine Collins, Microsoft’s east region public relations manager. She said most of the cuts announced today will be in Redmond, and that Microsoft’s research and development center in Cambridge, MA, will not be affected—at least not right away.

Collins’s full statement: “We expect that the global economic environment will continue to be challenging and we will continue to evaluate our business to ensure that our investments are aligned to current and future revenue opportunities. We continue to believe in the strength of the company, our ability to continue delivering value to customers and our approach to long-term growth. The majority of today’s job eliminations are in Redmond, consistent with the high concentration of employees based at our headquarters in the Seattle area. Microsoft in Massachusetts is not directly impacted by the immediate job eliminations announced by the Company today.”

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