They say the first casualty of war is the truth. Based upon recent events in the U.S. presidential elections, it looks like the truth is a casualty in politics as well. Whether out of desperation, ignorance, or political convenience, current and former contenders for the Republican presidential nomination have been questioning the long-term economic value of venture capital and private equity, which has been wrongly and unfairly labeled “vulture capitalism.”

First, let’s be clear. Venture capital and private equity—while related in that they both involve pools of private capital striving to generate returns for their investors (typically non-profit pension funds, foundations and university endowments)—follow very different approaches in achieving their goals. But neither seeks to undermine employees. In fact, venture capital typically creates jobs over the long term and private equity minimizes job losses.

Venture capital—a key component of the financial foundation for Silicon Valley—is focused on leveraging creative talent, capital, the hard work of employees and entrepreneurial experience to create and grow new businesses based on disruptive ideas. When successful, new businesses and industries are the result—creating new jobs for employees and wealth for investors and contributing to the competitive posture of America. When unsuccessful, the venture capital investors involved and their employee partners bear the costs of the failed effort. There are no government bailouts here—unless the politicians become involved a la Solyndra, the clean tech startup that fell into bankruptcy despite a $535 million federal loan guarantee. A situation like Solyndra is rare, however.

Venture capitalists and entrepreneurs don’t always win in the marketplace, but they don’t quit, either. In many instances, the same investors and talented engineers who failed will form new teams and pursue new dreams—always looking to create value and opportunity from ideas. The innovation flywheel is often successful and very lucrative: According to a 2011 Global Insight study, venture-backed companies accounted for 11.9 million jobs (11 percent of U.S. private sector employment) and $3.1 trillion in revenue in the U.S. in 2010—21 percent of the total US GDP–all based on an annual investment equal to less than 0.2 percent of GDP.

By and large, these are jobs at the higher end of the spectrum with solid, innovative companies—and often those that become global industry leaders, such as Intel, Apple, Google, Genentech, Facebook, Twitter, to name but a few. Ironically, while countries around the world are replicating the U.S. venture capital model and working overtime to encourage innovation and support venture capital ecosystems, U.S. politicos, themselves devoid of any new or creative ideas, have chosen to attack the engine of U.S. technology leadership.

Private equity also plays an important, though different, role in the U.S. economy. It builds and restores established but usually faltering companies. While colorful robber baron images of Gordon Gekko, acquiring functional businesses and breaking them apart for pure financial gain, may still be a popular reference point in today’s media, it is an inaccurate analogy in the vast majority of cases. Like venture capital investors, most private equity investors are paid for building real value, for themselves and their investors, not simply to make a quick buck. They do this by investing in under-performing companies, often in or on the verge of insolvency, in hopes of … Next Page »

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The Ford Motor Company announced Friday that it plans to open its first-ever dedicated R&D center on the West Coast in Silicon Valley early this year—a move in line with the automaker’s vision of becoming a company that builds mobile computers on wheels.

K. Venkatesh Prasad, senior technical leader for open innovation with Ford Research and Innovation, the company’s advanced engineering arm, says the idea of opening a research lab in the Bay Area has been percolating for some time, waiting for the technology that facilitates programmable interaction between devices and cloud computing to mature.

“We’re ready to be in the Valley to shape and accelerate the delivery of automotive features,” Prasad says. “The timing is appropriate now.”

Ford intends for the lab to serve as a hub for independent technology projects, as well as a base from which to seek new research and investment partners located throughout the region. Prasad imagines that the Silicon Valley location will link the existing supply base with “new friends—not the people who would typically show up here in Detroit.”

“The most exciting thing is the potential for really interesting interactions with startups,” Prasad says, adding that if a startup has a particularly compelling idea that’s not up to scale, Ford is willing to step in and co-create.

The ultimate goal is for the new Silicon Valley lab to create an “innovation network” connecting Ford’s Advanced Design Studio in Irvine, CA, and Ford employees working with connectivity-platform partner Microsoft in Redmond, WA. Ford also plans to partner with Stanford and other Bay Area universities.

Competitor General Motors opened an “advanced technology” office in Palo Alto, CA, in 2006. Numerous European and Japanese carmakers also have outposts in Silicon Valley.

Prasad says that, like a typical startup, the Ford lab currently has two employees. He expects to have an infrastructure in place by the middle of the year. Ford plans to recruit local employees in addition to rotating in employees from other existing Ford locations.

Prasad emphasizes the Silicon Valley office will be dedicated to “new experiences in the marketplace,” whether they involve mobility, connectivity, safety, energy storage, or affordability.

“We don’t want to duplicate efforts in other areas, but to look and learn from Silicon Valley,” Prasad says. “There’s a whole new opportunity in consumer demand. Now we have a passport to enter a new frontier and explore together.”

Ford President and CEO Alan Mulally will elaborate on the new areas of focus for the Silicon Valley lab, plus Ford’s latest technologies, in Las Vegas at the consumer electronics tradeshow International CES on Wednesday.

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I didn’t know the full extent to which the Boston area has a thriving data and analytics startup scene.

I had always associated the city primarily with biotech innovation. My company, Chart.io, provides hosted business dashboards to help companies visualize their database data. We’re based out in San Francisco (we were part of the 2010 Y Combinator class), but our investors, Avalon Ventures, call Boston home. When my friends at Avalon-backed Kinvey (mobile backends as a service) and Boston-based SessionM (a platform to spark deeper consumer engagement with mobile content and ads) and I decided to co-host a data visualization and analytics meetup for the local community, we expected to get 20-30 RSVPs at most. Instead, we broke 100 in a flash and saw a steady torrent of emails from data enthusiasts pleading for admission.

In fact, a deeper look into the Boston tech scene reveals quite a rich history of data and analytics companies, including Netezza, Endeca, ITA, EMC, and other giants. And it turns out, the startup scene is equally rich, with companies innovating around NoSQL, data storage, search, healthcare, and a variety of cloud computing ventures. Here’s a quick tour of the Boston- data landscape. And this is only the tip of the iceberg.

As data volumes have exploded in the past decade, so have the number of companies building tools to store, retrieve, analyze, and generally manage the deluge of data.

Two Boston-area companies, Cloudant and Basho, are tackling the big data problem through non-relational databases (NoSQL), designed to handle hundreds of gigabytes and even terabytes of data and enable applications to elastically scale out to meet the demands of millions (or hundreds of millions) of concurrent users. In this vein, Cloudant offers tools to help companies use Apache CouchDB, while Basho developed its own data store called Riak.

Meanwhile, other local firms are focusing on the next generation … Next Page »

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My job is pretty cool. I get to spend time picking the brains of some of the planet’s smartest and most successful entrepreneurs—and invariably, I’m asking them to talk about the one thing they care about most passionately, their startup and/or its technology.

Even if I weren’t doing something I care about passionately myself—helping to build a new kind of journalism startup—their excitement would rub off on me. How could it not, for anyone who believes that entrepreneurs drive innovation, and that innovation drives economic growth and holds the hope of solving some of the world’s biggest problems?

My agenda yesterday—Thursday, September 15, 2011—included a fairly typical mix of meetings and interviews with local tech-community members. The only unusual thing was that I wound up eating lunch twice. Maybe I didn’t get to grapple with big topics like unemployment or global warming, but I did get to have in-depth talks with about a dozen different people about their businesses. That material will find its way into dozens of different stories down the road, some right away, some months from now.

Here’s how my day went—minus (most of) the boring minutiae. Cue the ticking-digital-clock sound from 24.

7:00 am Get up. Make coffee. Fire up Flipboard on the iPad to see what the other tech blogs are saying today. Check e-mail. There are 72 new messages since I zeroed out the inbox the night before.

8:43 am Publish the daily deals roundup.

8:50 am Update the Pier 38 eviction story from Wednesday with added details that came in overnight.

9:00 am Study up on the StoryWorld Conference and Expo and MindJet for meetings later today.

9:26 am Publish Steve Blank’s latest essay, cross-posted from his personal blog, about Silicon Valley’s pay-it-forward culture.

9:50 am Take Rhody—to me, perhaps the most important member of the San Francisco innovation community—out for a walk.

10:00 am Jean-Marie Hullot, president and CEO of Fotopedia and former CTO of Apple’s Application Division, arrives for an interview, along with Christophe Daligault, Fotopedia’s senior vice president of global business. I can’t say yet what we talked about, but it was extremely cool.

11:34 am Walk from Xconomy San Francisco’s Potrero Hill headquarters to Warm Planet Bikes at 4^th and King to pick up bicycle. (I highly recommend them. They fixed my bent rear wheel for $54.)

12:10 pm Bike to Pier 38. Meet Gus Weber, entrepreneur-in-residence at Polaris Venture Partners, at Dogpatch Labs. Walk to Momo for lunch. Discuss the Pier 38 situation. Dogpatch, like the rest of the pier’s tenants, must move out by September 30 by order of … Next Page »

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Foreign visitors to Silicon Valley continually mention how willing we are to help, network and connect strangers. We take it so for granted we never even to bother to talk about it. It’s the “Pay-It-Forward” culture.

The Chips are Down
in 1962 Walker’s Wagon Wheel Bar/Restaurant in Mountain View became the lunch hangout for employees at Fairchild Semiconductor. When the first spinouts began to leave Fairchild, they discovered that fabricating semiconductors reliably was a black art. At times you’d have the recipe and turn out chips, and the next week something would go wrong, and your fab couldn’t make anything that would work. Engineers in the very small world of silicon and semiconductors would meet at the Wagon Wheel and swap technical problems and solutions with co-workers and competitors.

A Computer in every Home
In 1975 a local set of hobbyists with the then crazy idea of a computer in every home formed the Homebrew Computer Club and met in Menlo Park at the Peninsula School then later at the Stanford AI Lab. The goal of the club was: “Give to help others.” Each meeting would begin with people sharing information, getting advice and discussing the latest innovation (one of which was the first computer from Apple.) The club became the center of the emerging personal computer industry.

Helping Our Own
Until the 1980’s Chinese and Indian engineers ran into a glass ceiling in large technology companies held back by the belief that “they make great engineers but can’t be the CEO.” Looking for a chance to run their own show, many of them left and founded startups. They also set up ethnic-centric networks like TIE (The Indus Entrepreneurs) and the Chinese Software Professionals Association where they shared information about how the valley worked as well as job and investment opportunities. Over the next two decades, other groups — Russian, Israeli, etc. — followed with their own networks. (Anna Lee Saxenian has written extensively about this.)

Mentoring The Next Generation
While the idea of groups (chips, computers, ethnics) helping each other grew, something else happened. The first generation of executives who grew up getting help from others began to offer their advice to younger entrepreneurs. These experienced valley CEOs would take time out of their hectic schedule to have coffee or dinner with young entrepreneurs and asking for nothing in return.

They were the beginning of the Pay-It-Forward culture, the unspoken Valley culture that believes “I was helped when I started out and now it’s my turn to help others.”

By the early 1970’s, even the CEOs of the largest valley companies would take phone calls and meetings with interesting and passionate entrepreneurs. In 1975, a young unknown, wannabe entrepreneur called the founder/CEO of Intel, Bob Noyce and asked for advice. Noyce liked the kid, and … Next Page »

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[Updated 9/20/11. See below] The Silicon Valley vs. Boston tech scene discussion is a tired one, I know. But today we’ve seen a number of Boston-area companies make a splash with some significance to the San Francisco Bay Area.

Here we go with the highlights:

—Burst Media, the Burlington, MA-based online ad distributor now owned by Blinkx (a San Francisco video search company), has rolled out four online community channels to help advertisers target gamers, moms, sports fans, and (dare I say it) fashionistas. The new sites—called Giant Realm, MomIQ, Stadium, and Ella—encompass thousands of independent Web publishers and their audiences. The company calls this “a significant first step in the realignment of Burst’s publisher strategy following its acquisition by Blinkx.” It’s also yet another example of tech companies trying to figure out how to distribute better-targeted ads to specific types of consumers.

—Bluefin Robotics, the maker of autonomous underwater vehicles in Quincy, MA, has acquired the assets of Hawkes Remotes, a spinoff from Hawkes Ocean Technologies, a Bay Area developer of deep-ocean explorer vehicles. Terms of the deal weren’t given. Bluefin Robotics, which is owned by Battelle (and not to be confused with fellow MIT spinout Bluefin Labs), says it plans to work with Hawkes’s remotely operated machines to extend its current product line to the oil and gas industry.

—TalkTo, a Cambridge, MA-based mobile software startup, presented at TechCrunch Disrupt in San Francisco yesterday and was selected as one of six semifinalists to compete today. TalkTo makes a mobile app that lets people text any business—like a restaurant or hotel (to book a table or room) or a store (to ask about product selection)—and receive a text response, even if the business doesn’t know about TalkTo. I’m not quite sure how this works yet, but it sounds like a clever way to spread awareness of the app. It’s also yet another tool that local merchants will have to figure out if they want to use to communicate with customers.

Reached by e-mail, co-founder and CEO Stuart Levinson wrote, “TalkTo could be a very big deal because it’s a completely new way to communicate with businesses. Consumers have never been able to do this before. Instead of calling (which you can also do through the app), you suddenly have a second option—text.” He added, “How often do you think of calling a place only to realize it’s closed? So you make a note in your calendar to call the next day, or you try to remember and forget. Why not just send a text as soon as you think of it? When the business opens, you’ll get a text response.” [This paragraph was added on 9/20/11---Eds.]

—Tasted Menu, a Boston-area food tech startup, announced its beta launch today. The idea is to get people to rate the quality of specific restaurant dishes and share photos of them online. The startup, which is backed by angel investors, faces plenty of competition from companies like San Francisco-based Foodspotting and Boston-based Locu (formerly Goodplates, which was working on a dish-rating app).

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As a young entrepreneur, I cannot overstate the importance of serendipity. I don’t know whether I’ll ultimately be successful or not, but the success I’ve had so far has been 10 percent inspiration, 90 percent perspiration, and 50 percent surprises. And if you’re saying that this adds up to 150 percent—you’re catching on to my first lesson, which is that it will surprise you how much more it is than you thought: more work, more fun, more pain, more whatever. Your mileage will vary, but here are some of the surprises that I encountered along the way:

1. People love failure. I haven’t failed (yet) as an entrepreneur, but I failed a class in entrepreneurship at Stanford business school because I was too busy working on Piazza. People love the story, and not just for the irony. If you’re relatively smart and you talk about how you failed at something, it makes people think there must be a story there, and it humanizes you. I used to be sheepish about admitting to any failures, but I’m out and proud now. Failed classes, failed marriages—it’s all good.

2. Café > Garage. Naturally introverted and determined to live the Silicon Valley experience to its fullest, I set up in a garage for a while. This turned out to be a bad move for me. Hewlett had Packard, Jobs had Wozniak, Page had Brin, I had … nobody! The good garage stories all have two people, because one person alone in a garage can get kind of Unabombery. On the other hand, when I started working in cafes, I started running into random people. And one of the people I ran into helped me get my first funding and is now on the board of Piazza. Not bad for the cost of a cup of coffee.

3. People will work for free. Despite the ferocious competition for talent in Silicon Valley that famously drives up compensation levels at established companies, there is also a vast informal economy of passionate, entrepreneurial people who get excited about an idea and want to make an early contribution. They won’t work for free forever (and equity is surely part of the mix), but a few times in the past two years, I’ve pinched myself at the quality of work we got without spending any cash at all.

4. It pays to act dumb. I had always assumed that entrepreneurship required a Steve-Jobsian certainty that you knew how everything was going to work. That’s a myth, and an unfortunate one. For Piazza, at least, the greatest advances have come from my saying to someone—truthfully or not—”I don’t know the first thing about X. Teach me.” It’s disarming! And you meet really good people and get really good advice when you “play dumb.” And pretty soon you realize that you actually were kind of dumb, but by that time you’ve learned a ton.

5. Efficiency is not a luxury. When I thought about entrepreneurship, particularly as a person self-funding a company that had no employees, I thought romantically about doing everything myself. I’ll design. I’ll keep the books. I’ll take out the trash. But one thing I learned soon after I had two dimes to rub together was to spend money on my own personal efficiency. For example, the first time I booked a car service instead of renting a car, I closed two important deals balancing my laptop on my knees in the back seat. There’s a reason the division of labor is so successful!

… Next Page »

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I visited GM’s Advanced Technology division in Silicon Valley on August 4, the same day the Detroit giant revealed its second-quarter financial results. The numbers were far better than one might have expected, given the automaker’s troubled recent history. GM said it brought in $2.5 billion in net income in the quarter, which was a bit less than it had earned in the previous quarter but nearly double the figure from a year earlier, back when the company was still mostly owned by Uncle Sam. The same day, GM said that its market share, after six years in free fall, has started to tick back upward.

Now, that’s encouraging data—but your mind is probably stuck a few sentences back, saying, “Wait, what? GM has an office in Silicon Valley?” Innovation, after all, isn’t a big part of the brand image at a company where the most iconic and profitable product is still the massive, gas-guzzling Chevy Suburban SUV.

But indeed, GM (NYSE: GM) does have such an office—inside a converted HP manufacturing facility in Palo Alto, on the same street with more conventional Silicon Valley players like WePay, mSpot, and Fry’s Electronics. GM doesn’t play up the facility’s existence in the press, and it took me more than a year to score an interview with its managing director, Byron Shaw. But once I’d toured the place and had a chance to quiz Shaw on his mission, I realized I’d picked a pretty appropriate time to visit. The situation at the office was—well, far better than one might have expected, given the automaker’s troubled recent history.

The biggest achievement for the 10-person outpost, which Shaw set up in 2006, is that it has managed to stay open for five years, despite the company’s bankruptcy, and broader turmoil in Detroit and the larger economy. “Surviving through the 2008-2009 downturn was key for us,” says Shaw. “We were able to maintain this operation without any cuts or loss of resources during that time. That was a big thing.”

Byron Shaw

But GM has a common-sense reason for keeping the Palo Alto office open, and it’s this: When you’re in your car, you’re not just driving anymore—you’re likely in “infotainment” mode, toggling between satellite radio, the GPS navigation system, cell-phone calls, and the like. Which means the components that make a car stand out in the marketplace are no longer made just from steel, rubber, or glass, but also from electronics and software. “The writing is on the wall,” says Shaw. “Look at what a car is today, and look at what it will be in 20 years. If you want to be competitive you have to have the best software and electronics in the industry, and you won’t get there if you don’t participate in Silicon Valley.”

Shaw’s squad doesn’t actually write software or build electronics. Rather, its job is to build relationships with all the people who do—so that when a new idea comes along that might make a future GM car better, the company knows about it.

Take Terminal Mode as an example. One staffer from Shaw’s office represents GM within an informal group of companies called the Car Connectivity Consortium (Honda, LG, Motorola Mobility, Nokia, Samsung, Sony, Toyota, and VW are also members). The consortium is working on a way to make the infotainment system in your car into an extension of your smartphone. The idea is to let you access the content and apps on your phone via the in-vehicle sound system and LCD displays, with all user-interface elements automatically optimized for use while driving. (Sorry, no Doodle Jump allowed.)

Terminal Mode is both a set of Internet-based standards for moving all this data around, and an emerging system for evaluating and certifying new apps to make sure that they don’t exceed driver-distraction guidelines. Shaw says that Silicon Valley is “pretty much ground zero” for the consortium’s negotiations over Terminal Mode. For GM customers, the benefits of the company’s participation will be … Next Page »

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For a first-time entrepreneur, dealing with a venture capitalist can involve an equal mix of excitement and apprehension. If the VC has any sort of reputation or prominence, entrepreneurs are often grateful simply to be pitching their idea in the first place. Should discussions get far enough along that a term sheet is offered, a new entrepreneur is usually thrilled beyond words.

Those certainly were my emotions back in my entrepreneurial youth, the first time I dealt with venture capitalists. It was one of the most exciting times of my life. But I also remember a few other, much more troubling, emotions, and I know that these, too, are part of being a first-time entrepreneur. These involve the vaguely-formed stories that many entrepreneurs hear about the dark side of the venture world; stories of VCs who weren’t trusted partners interested in growing a business, but who simply took advantage of inexperienced or unlucky entrepreneurs for a quick, unsavory gain.

I fortunately never had to deal with that caliber of VC, and I don’t think you will, either. Telling one kind of VC from the other is much easier than you think, even if you are a first-timer. The task requires entrepreneurs to use a little common sense, and to do some of the same sort of the due diligence with their VCs that their potential VCs are doing with them.

First, the common sense. If you’re lucky enough to be dealing with a top-tier venture capital firm, you have much better things to be doing than fretting that your venture firm is plotting to steal your company away from you. The technology world seems sprawling from the outside, but once you are actually inside, it’s a rather small and tight-knit community. No venture fund can get to the top of this world via a career of double-dealing.

But what if a potential VC partner doesn’t have an obvious bit of Silicon Valley pedigree? This is where due diligence becomes important. Every VC lists their investments on their web site; give some of those investments a call and ask your counterparts what their experiences have been like. Good VCs won’t mind being “checked up on” in this way; to the contrary, they will view it as an indication of your seriousness and thoroughness.

If you end up doing business with a VC, the interaction will be based on the term sheet that spells out the particulars of the venture firm’s investment in you. Term sheets can be extremely complicated documents, and you’ll need the guidance of an experienced lawyer to help you with your side of it.

I am not that lawyer. But there is one element of a term sheet I’d like to mention, in part because it seems to confuse many entrepreneurs, and in part, I regret to say, because I have occasionally seen unscrupulous venture capitalists use it to their advantage.

A “no-shop” clause is often, but not always, a standard part of a term sheet. During the period covered by the clause, the entrepreneur agrees to … Next Page »

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Dharmesh Shah, the co-founder of HubSpot and the author of the blog OnStartups, shared a post last week that really hit home. It was called “Dear Friend: Sorry: My Heart Says Yes, But My Schedule Says No.” Dharmesh explained that his e-mail inbox is perpetually overloaded with requests from people who want to meet with him to ask for an investment or to get his thoughts about their business ideas. The blog post consisted of a form letter gently explaining why, despite his best intentions, he can’t follow through on most of these requests. “One of my biggest weaknesses in life is that I too often say yes,” Dharmesh wrote. “I’ve learned the lesson that every time that I say yes to something new, I am effectively saying no to something else. And I’ve already said yes to too many things, and so have to say no to you.”

Boy, have I been there. I’m probably even worse than Dharmesh at saying no. That’s one of the main reasons why there are about three dozen full-length interviews with the CEOs of various companies sitting on my laptop, waiting to be turned into three dozen Xconomy feature stories—because I wasn’t able to say no when these companies invited me to meet with them.

The other main reason, of course, is that Bay Area entrepreneurs are just too darn innovative. They’re creating noteworthy products and companies far faster than I can write about them. That’s not my fault, but still, it’s embarrassing to have such a large story backlog.

This week I want take Dharmesh’s cue, and do something to get the backlog under control. I’m not going to compose a “Dear Friend” form letter, but I am going to explain some of the factors that go into my editorial choices, in the hope of helping entrepreneurs and PR professionals who are looking for coverage in Xconomy to understand 1) what my priorities are, 2) why it might take me a while to reply to your e-mail pitch, and 3) why I might have to say no.

I should preface all this by saying that I don’t want to come off as a complainer. For a technology writer, an oversupply of intriguing story leads is a good problem to have. I’m incredibly grateful for the way entrepreneurs and investors have welcomed Xconomy into the San Francisco/Silicon Valley innovation community since we set up shop here in June 2010. My interpretation of the “problem” is that readers are hungry for Xconomy’s style of biztech journalism—with its tendency toward longer, more magazine-style company profiles and news analyses. Our challenge now as a publication is to scale up, so that we can provide even more of this kind of coverage. Meanwhile, though, I need to do a better job of explaining what my sources and my readers should expect from me. That’s what today’s column is about.

One more caveat: I’m only writing about myself here. My colleagues in Xconomy’s other bureaus in Boston, Detroit, New York, San Diego, and Seattle are just as besieged with story ideas, and just as constrained by the fact that there are only 168 hours in a week. But they all have their own ways of sorting through story leads and managing deadlines. Nothing I say here is meant to deter you from contacting them with your story ideas if they are appropriate for other cities and our other writers’ specialties.

Where I Get Story Ideas

I’ll try to break this down into categories, with rough percentages. I’m talking about feature stories here, not the 1-paragraph news briefs we write about venture funding rounds and the like.

Breaking news—5 percent. This is a much lower figure than most other tech blogs aim for. But most of the time, I’m not trying to be the first to tell my readers something. I’m trying to help them see why it’s important.

Pitches from PR firms—30 percent. This is certainly the category that fills up my e-mail inbox the fastest, and takes the most time to manage. Sometimes, the pitches pertain to companies I’ve been wanting to write about anyway, so they lead to interviews, which lead to stories. Sometimes I’ve never heard of the company before, so I have to go off and do some research before I respond. I evaluate pitches based on a bunch of factors, as described in the next section.

Hanging out with entrepreneurs and investors—30 percent. I spend a lot of time talking with startup founders and executives of larger companies, whether in formal interviews or informal coffee, lunch, or cocktail meetings. I travel up and down Sand Hill Road a lot, meeting with … Next Page »

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Scientists and engineers as founders and startup CEOs is one of the least celebrated contributions of Silicon Valley.

It might be its most important.

ESL, the first company I worked for in Silicon Valley, was founded by a PhD in math and six other scientists and engineers. Since it was my first job, I just took for granted that scientists and engineers started and ran companies. It took me a long time to realize that this was one of Silicon Valley’s best contributions to innovation.

Cold War Spinouts

In the 1950’s the groundwork for a culture and environment of entrepreneurship were taking shape on the east and west coasts of the United States. Each region had two of the finest research universities in the United States, including Stanford and MIT, which were building on the technology breakthroughs of World War II and graduating a generation of engineers into a consumer and cold war economy that seemed limitless. Each region already had the beginnings of a high-tech culture, Boston with Raytheon, Silicon Valley with Hewlett Packard.

However, the majority of engineers graduating from these schools went to work in existing companies. But in the mid 1950’s the culture around these two universities began to change.

Stanford—1950s Innovation

At Stanford, Dean of Engineering/Provost Fred Terman wanted companies outside of the university to take Stanford’s prototype microwave tubes and electronic intelligence systems and build production volumes for the military. While existing companies took some of the business, often it was a graduate student or professor who started a new company. The motivation in the mid 1950’s for these new startups was a crisis – we were in the midst of the cold war, and the United States military and intelligence agencies were rearming as fast as they could.

Why It’s “Silicon” Valley

In 1956 entrepreneurship as we know it would change forever. At the time it didn’t appear earthshaking or momentous. Shockley Semiconductor Laboratory, the first semiconductor company in the valley, set up shop in Mountain View. Fifteen months later eight of Shockley’s employees (three physicists, an electrical engineer, an industrial engineer, a mechanical engineer, a metallurgist and a physical chemist) founded Fairchild Semiconductor. (Every chip company in Silicon Valley can trace their lineage from Fairchild.)

The history of Fairchild was one of applied experimentation. It wasn’t pure research, but rather a culture of taking sufficient risks to get to market. It was learning, discovery, iteration and execution. The goal was commercial products, but as scientists and engineers the company’s founders realized that at times the cost of experimentation was failure. And just as they don’t punish failure in a research lab, they didn’t fire scientists whose experiments didn’t work. Instead the company built a culture where when you hit a wall, you backed up and tried a different path. (In 21st century parlance we say that innovation in the early semiconductor business was all about “pivoting” while aiming for salable products.)

The Fairchild approach would shape Silicon Valley’s entrepreneurial ethos: In startups, failure was treated as experience (until you ran out of money).

Scientists and Engineers as Founders

In the late 1950s Silicon Valley’s first three IPOs were companies that were founded and run by scientists and engineers: Varian (founded by Stanford engineering professors and graduate students), Hewlett Packard (founded by two Stanford engineering graduate students), and Ampex (founded by a mechanical/electrical engineer). While this signaled that investments in technology companies could be very lucrative, both Shockley and Fairchild could only be funded through corporate partners—there was no venture capital industry. But by the early 1960′s the tidal wave of semiconductor startup spinouts from Fairchild would find a valley with a growing number of U.S. government backed venture firms and limited partnerships.

A wave of innovation was about to meet a pile of risk capital.

For the next two decades venture capital invested in things that ran on electrons: hardware, software and silicon. Yet the companies were anomalies in the big picture in the U.S.—there were almost no MBAs. In 1960s and ‘70s few MBAs would give up a lucrative career in management, finance or Wall Street to join a bunch of technical lunatics. So the engineers taught themselves how to … Next Page »

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“I am not convinced that I would put my child in an incubator that is made of car parts.”

That’s Krista Donaldson speaking. She’s the CEO of Palo Alto, CA-based D-Rev, and the quote says a lot about the non-profit organization and its philosophy on designing healthcare equipment for the developing world.

You may have read about the incubator in question—it’s called NeoNurture, and is the creation of Cambridge, MA-based design studio Design That Matters. The device made a media splash and won design awards last year for its unique solution to the parts shortages that often render medical equipment inoperable in rural hospitals in developing countries. NeoNurture uses car headlights to keep neonatal infants warm, a dashboard fan for air circulation, and a motorcycle battery for backup power. The machine’s designers reasoned that since car parts and car-repair experts can be found almost anywhere, NeoNurture ought to be easier to maintain than a more specialized unit.

But to Donaldson’s way of thinking, the folks at Design that Matters forgot to ask a key question about their device: Could they imagine selling it to a U.S. hospital? “It’s a great example of a product that resonates with the techie community because it very cleverly solves a real need,” says Donaldson. At D-Rev, by contrast, “Our approach is that we are developing world-class products that meet quality standards here, but are designed to meet the needs of the environment there. With every project, we ask, ‘Is this something that could be used at Stanford Hospital? Is this something I would put my children in?’”

D-Rev isn’t building an infant incubator, but it is building a phototherapy device for treating severe jaundice, a condition that afflicts about an eighth of all newborns. And if there’s a simple premise behind that project and the others underway at the four-year-old organization, it’s that patients and healthcare providers in the developing world deserve access to the same high-quality technology available here—and that sometimes all it takes to make such technology affordable is a little Silicon Valley-style design and engineering thinking, matched with on-the-ground market know-how.

Indeed, if you visit D-Rev’s Emerson Street headquarters, just a couple of blocks away from world-famous design consultancy IDEO (where Donaldson once interned), it feels much like any other Palo Alto startup, with the requisite Macs, iPad, and overhead projector. The only sign that D-Rev is developing physical stuff, rather than software, is in the laboratory, where prototypes litter the floor and there’s a workbench complete with circuit boards and soldering irons. And the only sign that D-Rev is a non-profit is…well, there aren’t any.

D-Rev CEO Krista Donaldson shows a prototype for the Brilliance phototherapy device to doctors in India.

“One of the things that makes us a little out of the ordinary, and one of the things that makes us really successful, is that our methods are 95 percent business methods,” says John Dawson, chairman of the board at D-Rev (the name stands for Design Revolution). “It’s not like we are taking just a little bit of Silicon Valley and shoving it into a non-profit. Most of this organization operates like a startup.”

The main difference, Dawson told me when I visited him and Donaldson in Palo Alto in late April, is that D-Rev is aiming for social benefit, not big profits.

“Our currency is impact,” says Donaldson. “We collect minimal royalties on our products, we have licensing deals, but our measure is how successfully we treat children who wouldn’t otherwise receive treatment, and mobilize people who wouldn’t otherwise walk.” (That’s a reference to the JaipurKnee, D-Rev’s multi-axis prosthetic knee joint for amputees.) D-Rev depends on philanthropic grants to fund early product R&D that the market can’t support—the Bill and Melinda Gates Foundation is its largest supporter. But its product development methods are straight out of the for-profit world. And it doesn’t waste time on products that don’t have a market measuring in the millions of people, or for which it can’t find eager manufacturing and marketing partners.

Donaldson is a mechanical engineer who joined D-Rev in 2009 after working as a product designer with KickStart International (then ApproTec) in Kenya, a reconstruction advisor for the … Next Page »

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Commencement season is coming to a close, which means a lot of students and recent graduates are leaving town. That might be a good thing if you’re trying to get a seat at Crema Café near Harvard or Flour Bakery near MIT, but it ain’t good for local startups.

The brain drain of Boston-area tech grads leaving for the West Coast is well-worn territory. Talented developers, fresh out of school, are taking high-paying jobs with big companies like Google, Amazon, Facebook, Apple, Microsoft, and Groupon, none of which are headquartered in Boston. Ambitious young entrepreneurs move to Silicon Valley to seek their fortunes—and are sometimes encouraged by their faculty mentors to do so. How can the local innovation community turn things around?

Cultivating local talent is, in fact, one of the main topics being covered at today’s “Building a Better Commonwealth” forum, organized by the Boston Globe.

A trio of leaders I’ve spoken with recently have also added their perspectives to the conversation. Each of them is tackling the startup brain-drain issue from a different angle. Yet they all agree local universities are the place to start, as the quality (and sheer number) of schools represents a competitive advantage for the Boston area over other parts of the country.

Jon Pierce is an unassuming guy who is trying to lead a grass-roots revolution—in angel investing. The techie/hacker/entrepreneur is organizing the second annual “Angel Bootcamp” in Cambridge next Tuesday, June 14. The goal is to get angel investors excited about pouring their hard-earned dollars back into the local startup community. Yet Pierce recognizes that the talent and idea spring lies further upstream, especially in the fields of consumer Web and mobile technologies.

Pierce says universities “are our best chance of improving things quickly.” That means finding new ways to harness the entrepreneurial talents of students and faculty; building stronger ties between schools and local tech companies; and encouraging students to do internships (and seek jobs) at Boston-area startups. “Working at a startup is the best education you can have as an entrepreneur,” he says.

Of course, all these things are already happening at local schools. But Gordon Jones, the inaugural director of the Harvard Innovation Lab, slated to open this fall, represents a new effort to ratchet up the intensity of collaborations on campus. It may be unspoken, but the big idea behind the i-lab is to keep the next Mark Zuckerberg (Facebook), Bill Gates (Microsoft), or Tony Hsieh (Zappos) from leaving town.

“The promise is to be a home for entrepreneurs at Harvard,” Jones told me last month.

Which brings us to perhaps the most ambitious talent-building and entrepreneurship program in Boston today. MassChallenge, a nonprofit incubator in its second year, aims to run “the world’s largest startup competition” and prove that in Massachusetts, “you can make a startup machine that just produces startups,” says John Harthorne, who leads MassChallenge as CEO. (The program recently announced its 125 finalist companies, which have entered a summer mentorship program and will compete for substantial cash prizes in the fall.)

I asked Harthorne about the role of local colleges in fostering transformative new business ideas—and keeping them local, instead of encouraging them to skip town. “Universities are clearly the foundation of innovation for Massachusetts,” he says. In part through MassChallenge’s progress in attracting attention and resources, he says, “We’ve raised Boston and Massachusetts in the ranks of options. We’re in the top three [of places to recommend building a company] across all the professors and schools. It gives us an at-bat. We’ve demonstrated an incredibly collaborative environment.”

Harthorne was talking mostly about the MassChallenge program, but his comments might just as well apply to Boston’s broader ecosystem, especially for those coming out of school: “We’ve never been this well-positioned,” he says. “All the lights are green.”

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Picking the right team can make all the difference when launching a new venture. Starting on May 21, a group of some 16 designers, engineers, and marketing professionals will gather to form teams aimed at creating startups. Founder Labs, a five week “pre-incubator” program targeting concepts for the mobile sector, is ready for its Manhattan debut.

Shaherose Charania, CEO of Founder Labs and Women 2.0, said her program was created to help teams come together and validate their ideas prior to formally launching startups. While accelerator programs such as TechStars offer existing startups seed funding and the opportunity to pitch to potential investors, Founder Labs brings together individuals who may not have completely formed their ideas yet but are eager to explore entrepreneurship.

Charania said she taps her connections with incubators, accelerators, and seed funds such as TechStars, 500 Startups, and i/o Ventures to refer in the teams from Founder Labs that show potential. The Founder Labs program, started last August in San Francisco, has run three times—twice in San Francisco and once in Menlo Park—helping would-be entrepreneurs find others with the skills and desire to bring new ideas to market.

For example, Spoondate, a company born from last October’s session of Founder Labs, is expected to launch this spring. Spoondate is a dating website for foodies with shared tastes. Charania said the company was accepted in February into the incubator program run by angel fund 500 Startups, which includes seed funding and access to investors.

Founder Labs NYC is the fourth iteration of Charania’s program and its first appearance outside of California. Charania said the 16 participants at Founder Labs NYC, chosen from more than 150 applicants, will meet in the evening Monday through Friday during the coming weeks and on some weekends. In addition to collaborating with each other, participants will present their ideas to investors and veterans of the startup community such as James Robinson, managing partner with RRE Ventures, and Winifred Mitchell Baker, chairman of the Mozilla Foundation.

San Francisco-based Founder Labs is an offshoot of Women 2.0, a venture that encourages women in the technology sector to start their own companies. Charania said Founder Labs picks a 50–50 split of men and women to participate.

Charania, an émigré from Canada, knows a little something about starting from scratch. After she earned her bachelor’s in business administration from the University of Western Ontario and spent one year abroad in Spain, she moved to the U.S. in 2005 with no money, no job, and no idea … Next Page »

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Looks like Microsoft is officially tired of having people poached by the Silicon Valley raiders setting up shop in its backyard. CEO Steve Ballmer’s new memo on employee compensation changes, in wide circulation this morning, looks somewhat like the Redmond, WA-based software giant’s version of Google’s abrupt companywide raise-and-bonus combo of late last year.

Microsoft (NASDAQ: MSFT) is making this move after several years of watching San Francisco Bay Area companies establish beachheads in Seattle to recruit talent. Google (NASDAQ: GOOG) has been in the Northwest since 2004 and keeps on growing, saying that it ended 2010 with about 800 people in the Puget Sound area.

Salesforce.com, a direct Microsoft competitor on certain business software, recently moved into expanded offices and has been tied up in a non-compete lawsuit with Redmond over its hiring of a Microsoft employee. Meanwhile, IT infrastructure company Splunk started its Seattle offices with Microsoft veteran Brad Lovering, and two of the first hires at Facebook’s Seattle office were from—you guessed it—Microsoft.

Ballmer’s memo does what we in the news business call “burying the lede”—he starts off talking a lot about rejiggering the review process. Let’s face it: Most employees in any large company will eventually come to hate their reviews, and probably will no matter how you structure them. The real meat of the memo—first reported by GeekWire from what I can tell—is in the take-home pay.

Ballmer’s email, which Microsoft has confirmed as authentic with ZDNet, said the company is “increasing our investment in compensation across the board.” Ballmer called the changes, which take effect in September, “the most significant investment in overall compensation we have ever made.”

Specifically, Ballmer wrote that all employees would see some of their stock compensation converted into up-front cash—probably welcome, considering that a Microsoft stock is still well below its roughly $37 high of a few years ago, and isn’t making anyone rich in the way it did 15 years ago. The changes also would mean possible merit raises for all employees, raises targeted at specific job categories and cities “where the market has moved the most,” and more money overall set aside for raises and stock awards. Also, don’t forget that in 2013, Microsofties are going to have to start paying for part of their healthcare benefits for the first time.

Also significantly, Ballmer ended with a bit of rah-rah that seemed intended to quell the criticism that Microsoft is a lumbering behemoth that can’t get out of its own way enough to do inspiring things: “Through our history, we have been THE place people came when they wanted to make a difference in the world through software, hardware and services. This is as true today as it has been at any time in our history, and the changes we’re rolling out today will help ensure Microsoft continues to be the place that top talent comes to change the world.”

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The Seattle tech scene got its first entrant in what looks like a coming wave of initial public offerings when Zillow made its intentions official, filing paperwork with federal regulators Monday for a future stock sale. In its filing, the online real-estate listing and mortgage database said it would seek about $52 million from the stock market—not a huge sum for an IPO, but significant for the area’s entrepreneurship and investing community nonetheless.

Zillow has seen increasing competition in the online real-estate sector, including vocal San Francisco-based startup Trulia, which recently boasted that it was assembling an “IPO-ready management team.” HitWise reported that Zillow’s traffic ranked No. 3 among real estate websites, one spot ahead of Trulia and just behind Yahoo—where Zillow’s listings appear under a partnership.

There was plenty more action elsewhere on the Seattle tech beat:

—PopCap looks like it’s also ready to hit the public markets. The Seattle casual game company recently went on a media and investor blitz in New York, talking up its growth, revenue, and position in the hot gaming market. We gleaned a lot of interesting bits from the various interviews that PopCap gave, including an assertion that it generated $100 million in revenue last year, an increase of about 20 percent from the year before. The company’s leaders also discussed difficulties in getting investors to understand the difference between its development compared to a console game publisher, and the attractiveness of hitting the public market before social-game giant Zynga.

—Speaking of Zynga, I headed over to the San Francisco company’s new Seattle office to look at the digs and hear some remarks from founder and CEO Mark Pincus on the company’s plans for its new Northwest beachhead. In one word: Hiring. The maker of addictive Facebook-based games like “FarmVille” and “Mafia Wars” was not shy at all about inviting techies in the packed crowd to send in their resumes—Pincus gave out his e-mail address and spent quite a bit of time talking one-on-one with people afterward about jobs.

—Microsoft co-founder Paul Allen continued drumming up interest in his new autobiography, “Idea Man,” with an interview on 60 Minutes that delved into some of the early Microsoft stories and Bill Gates arguments detailed in the excerpt published recently in Vanity Fair. For a guy who hasn’t … Next Page »

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It’s no secret to anyone looking at venture activity that New York has blossomed over the past few years as a startup mecca. Riding a wave of investments in Web , media, and advertising startups, the city has recently climbed past Boston to become the second greatest center (after the Bay Area) of high-tech deal making when it comes to the general Internet space.

But why? It’s not hard to make some guesses about the economy coming back, or about the low cost of starting companies these days. But for a more expert perspective, I thought I would check in with Xconomist Rich Levandov, a partner at Avalon Ventures. Levandov is based in Boston, but he’s had a good ride on New York startups in the past few years—including some great exits with ad technology companies Tacoda and Pictela (both sold to AOL, Tacoda in 2007 and Pictela last December)—and he even took an apartment in the Big Apple last summer.

In fact, the first time I interviewed Levandov was back in 2007 about Tacoda. He and company founder Dave Morgan revealed they had made a deal to get tattooed with the Tacoda logo if the company returned 10x the investment Levandov, then with Masthead Venture Partners, had made—which it did when AOL bought it for about $275 million. (By the way, there’s still no tattoo three years later—what’s up with that, guys?)

Levandov, who also co-led the Series A round in Zynga with New York’s Union Square Ventures and Boulder-based Foundry Group, says he currently has seven or eight investments in New York, among them Ad Summos and TV ad company Simulmedia (which Morgan also founded)—and that he’s seriously looking at three or four more. It’s safe to call him extremely bullish on the Big Apple’s startup future. “Avalon’s interest in New York has been soaring, but I think it’s going to double again,” he says. (In case you doubt the NY connect with Avalon, Levandov’s colleague, Avalon founder Kevin Kinsella, is the son of Broadway and movie actor Walter Kinsella—and one of the original producers of the musical Jersey Boys).

So, following are some of his thoughts and observations on why the city’s innovation scene has exploded lately, what has changed in recent years, and what he thinks the future holds.

—It’s Safe to Go Back in the Startup Waters

“New York City has always been about ideas,” says Levandov. When it came to tech startups, those ideas were largely benched after the bubble crashed early in the 21st century, but that has changed in a big way the past three years or so. Now, he says, “It’s safe to do a startup again. It’s kind of like … Next Page »

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Far too much has been written about Boston versus New York City. Sports rivalries and cultural differences have a way of coloring our world view to include startup companies and venture capital. However, the past few years tell about a much closer relationship. The real story is Boston and New York City, particularly versus Silicon Valley.

This week, we welcome Xconomy’s most recent addition to its coverage, New York City! While having started in Boston and expanded across the country, Xconomy’s newest addition reflects the growing ties and teamwork between New York and Boston.

Let’s start with a few data points. It’s always been easy to think about Boston and New York as separate worlds. After all, it’s 225 miles between downtown Boston and Manhattan—a journey that takes typically takes 3 ½ hours. In contrast, the trip from San Francisco to San Jose is only 48 miles along the 101, which in the middle of the night is under an hour. With traffic, well, that depends and can take as long as the Boston-NYC trip.

Somewhat ironically, the technology created by entrepreneurs and the VCs that back them have been shortening these distances. Wi-Fi on the Acela and 3G mobile networks let entrepreneurs and venture investors stay productive on the Boston-NYC journey, making the trip seem a lot shorter. Personally, I love working on the Acela. It’s some of my most productive time, and I feel like I’m in the office. I can even have meetings, particularly if I secure the seats facing each other with the table between them. Web networking and collaboration tools make sharing information and coordination much more effective as well, not only between these two cities but across the world.

Venture capitalists and angel groups are expanding and coordinating financing activities between Boston and New York City. “New York is clearly on a roll here. If anything we’ve seen the presence of several Boston firms either opening offices or having affiliations,” said long-time New York venture capitalist and founder of Greycroft Partners, Alan Patricof. Matrix Partners recently opened an office, headed by Nick Beim. New firms like Founder Collective operate fairly seamlessly between the two cities. TechStars’ recent expansion to New York has been a great success. The Golden Seeds angel group several years ago opened chapters in New York City, Boston, and Philadelphia that systematically collaborate. Syndication among angel groups more broadly in New England and New York got started around 2005 and has been going through various iterations and improvements.

How does this then play out in the numbers? Silicon Valley may have had the lead for many years, but looking at emerging companies, the Boston-New York team looks like it’s been running a fast break. According to the most recent PwC MoneyTree data, the gap between New York/Boston and Silicon Valley for seed and early-stage companies has closed, whether looking by total deals or by dollars.

Five years ago, Silicon Valley did nearly twice the number of seed and early-stage venture deals compared to Boston and New York combined, 338 versus 178 in 2005. For 2010 the two regions are essentially tied with 400 for Silicon Valley and 392 for New York/Boston. Dollars tell a similar story. For 2005, the ratio was 1.3:1 in favor of Silicon Valley, growing to 2.2:1 by 2007. By last year, that gap had closed to 1:1 with $2.16B invested in Silicon Valley seed and early-stage companies and $2.05B invested in those in New York/Boston (see charts above.) “The startup and entrepreneurial environment in New York is the strongest I’ve seen in the past 40 years,” says Patricof.

But it’s not just adding numbers. The rapid growth of consumer-oriented, ad-tech, and fin-tech ventures makes Boston and New York City highly complementary and drives increasing … Next Page »

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Ann Arbor is getting a fresh infusion of Silicon Valley.

Ann Arbor SPARK, one of four business accelerators in Southeast Michigan, said Tuesday that it named Paul Krutko president and CEO.

Krutko, previously the chief development officer for San Jose, CA., will replace Mike Finney, who’s now CEO of the Michigan Economic Development Corp.

Krutko brings an impressive resume. A graduate of the University of Cincinnati, he led economic development efforts in Cleveland, OH, and Jacksonville, FL, before moving to San Jose, the heart of Silicon Valley.

“Paul has impressive experience in economic development…and a driving passion for innovation economies,” Ann Arbor SPARK chair Dr. Stephen Forrest, also vice president of research at the University of Michigan, said in a statement. “His experience will ensure that SPARK fulfills its promise for building the region’s economy and its national presence.”

What’s interesting about Krutko’s time in San Jose are his efforts to integrate arts and culture with economic development programs. Tech entrepreneurs in Ann Arbor say creating a vibrant social scene is just as crucial to building an innovation ecosystem as is venture capital and technology.

Krutko also authored San Jose’s Green Vision, a plan to promote economic growth by meeting specific goals for environmental sustainability. In 2009, the International Economic Development Council in Washington, DC, named Krutko a Fellow Member, “for achieving unusual stature in the field of economic development and closely related disciplines.”

“Over the last nine years, I’ve worked in the heart of Silicon Valley, one of the most innovative places in the world,” Krutko said in a statement. “The opportunity to come back home to the Midwest and join an organization that’s becoming known across the country for its work in changing Southeast Michigan’s economic destiny, is exciting.”

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The Cheezburger Network‘s bid to dominate meme-dom took another leap forward this week with the acquisition of Know Your Meme, a site that attempts to trace the histories of passed-around bits of Internet pop culture that are the fodder for Cheezburger’s humor sites. But the purchase of Know Your Meme, said to be in the seven figures, is significant for more than adding context to a moment of funny: The acquisition also plants the Cheezburger flag in New York.

Founder and CEO Ben Huh told us the Seattle-based company definitely plans to add more staff to the “Cheezburger East” offices in Manhattan. This was the first big buy we’ve seen Huh make since Cheezburger landed $30 million in investment backing earlier this year, and it appears the guy behind the weird cat photos means business. Other big news from the past week or so in Seattle-area technology business:

—RealNetworks (NASDAQ: RNWK) CEO Bob Kimball resigned abruptly on Monday, with no specific reason identified. Kimball was a veteran of the Seattle online media company, which hung around through the dot-com bust and has spent the past year or so trying to slim down and remake itself. Most of the heavy lifting on that score fell to Kimball, who took over the chief executive’s chair from Real founder and chairman Rob Glaser early last year. Kimball said just a few weeks ago that Real had reached the end of its restructuring phase and was preparing to move forward—that restructuring included shedding a good number of jobs and spinning off the Rhapsody music joint venture. At this point, it looks like either Kimball, the company, or both decided that it was a good time to make a switch. Glaser has said he’s not coming back as CEO.

—I dove into the Seattle-area market for tech jobs, and folks who watch that scene closely are ringing alarm bells about the ability of this region to sustain the growth needed to keep companies staffed. It’s particularly worth paying attention to since the college system doesn’t have the capacity to supply people as fast as companies like Microsoft and Amazon need them, which naturally leads to some poaching of the big boys’ talent. This is not necessarily a new dynamic, but it is becoming more amplified as more Silicon Valley companies move northward to satisfy their own hiring needs beyond the Bay Area. Stuck in the middle are smaller companies, particularly those that have made it past the early startup phase and are pushing toward a second round of growth and evolution.

—I had fun sitting down with Seattle startup lawyer Eric Koester for a debrief on the seemingly overnight debut of Zaarly, a kind of reverse-auction service that allows people to tap into mobile networks to supply goods, services, or close to anything else legal that they’d like to pay for (there is a ban on … Next Page »

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