It wasn’t so much the predictions as the discussion that was most interesting at last night’s annual predictions dinner, organized by the Washington Technology Industry Association. Will Twitter be acquired in 2010, and why? Who will have the dominant cloud computing platform in the next couple of years? What kind of startup are you looking to build or finance, and which areas are you staying away from?

A panel of Seattle-area tech entrepreneurs and investors gamely took the bait and had some lively exchanges over the course of an hour. OK, these guys all know each other, and we’ll take what they say with a grain of salt since it’s a public forum—but here were some of the most interesting points they made. (You can read more comprehensive recaps of the panel on Brier Dudley’s blog at the Seattle Times, and soon on TechFlash by moderator John Cook.)

The panel was split 3 to 2, with the narrow majority guessing Twitter will get bought next year. Andy Sack of seed-stage fund Founder’s Co-op predicted Twitter will make more money than Facebook in 2010 (surprising, given the current disparity in the other direction). Glenn Kelman, the CEO of Redfin, an online real estate firm, said Twitter should charge for search (as it has begun to do in partnerships with Google and Bing). Kelly Smith from Curious Office and the startup Pressplane argued that Twitter could be “absorbed by a big company,” but “it’s going to go nowhere.” By the end of the evening, Sack was predicting that Microsoft would buy Twitter next year.

There was a consensus that 2010 could be a big year for acquisitions. Bill Bryant of Draper Fisher Jurvetson boldly predicted that Amazon will buy Netflix, Blockbuster, and Hulu, while opening brick and mortar “Amazon media stores.” Greg Gottesman from Madrona Venture Group said Cisco might buy EMC (for VMware) and Seattle-based F5 Networks, while Microsoft might buy Research In Motion, the maker of the BlackBerry smartphone. Sack predicted Adobe would pick up Seattle photo-editing startup Picnik. Rupert Murdoch (News Corp.) would buy Seattle’s Cheezburger Network, and someone would buy Redfin.

Looking back on 2009 for a minute, the big deals that were questioned by the panel included Adobe’s acquisition of Omniture (Gottesman said it just didn’t make sense strategically) and …Next Page »

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[Update: 12:30 pm Pacific, 11/20/09] Icos was once the great hope for Seattle biotech. Founded in 1990 with an investment from Bill Gates, it went on over the next 15 years to create a $1 billion molecule for treating erectile dysfunction, and employed about 700 people nationwide at its peak. For a while, it looked like it would carry the torch as the only big, independent, profitable biotech company with growth potential and staying power in the Seattle area.

That hope was dashed about three years ago, when Icos agreed to be acquired by its partner, Eli Lilly, ultimately for about $2.3 billion. Many readers will remember the controversy over this deal, which I covered with intensity through the fall of 2006 for The Seattle Times. Employees who had worked together for years and built a great camaraderie were deeply upset with CEO Paul Clark, who enriched himself with a $23 million golden parachute through the transaction while kicking most of them to the unemployment line. Shareholders objected to what they saw as a sweetheart deal for management, and ultimately forced Lilly to raise its bid before they handed over their shares.

Even Icos’s founding CEO and legendary leader, George Rathmann, who was not in good health at the time, objected to what had become of the company he created. It had essentially squandered an entire pipeline of drug candidates in the wake of its hit with tadalafil (Cialis), leaving no real opportunity for an encore, and no real strategic alternatives other than getting bought by Lilly.

About 550 people were employed locally at Icos at the time the Lilly acquisition closed in January 2007, and about 350 high-paying local jobs were cut. All that was left was a contract biotech drug manufacturing facility, which Lilly didn’t want, and sold to CMC, a Danish company that continues to operate at the old Icos facility in Bothell today.

But now that three years have gone by, what happened to all that intellectual capital that came to create exciting new biotech drugs for Icos? This is an important question for the future of Seattle biotech, given how companies that look to start or expand to new locations always consider the caliber of the local workforce as one of the main criteria.

From what I’ve been able to gather by talking to some very helpful former Icosians, I’ve discovered that quite a few of these bright people have stayed in the Seattle region. Some left for new opportunities elsewhere, usually after they couldn’t find suitable work in Seattle. Quite a few more than I expected have gone on to co-found or play critical technical roles in some intriguing startups—including Calistoga Pharmaceuticals, CoCrystal Discovery, Mirina, Theraclone Sciences, and Xori.

What follows here is a list of more than 270 names I’ve been able to gather from people who had made contributions to the science, medical, or business aspects of Icos. Special thanks go out to the following Icos alumni who were hugely helpful in allowing me to piece this list together: David Crowe of Mirina; Pat Gray of Accelerator; Ed Kesicki, Allen Casey, and Stephanie Florio of the Infectious Disease Research Institute; and Albert Yu of Calistoga Pharmaceuticals.

Of course, this list isn’t comprehensive. I’ve done my best to verify everybody’s connection to Icos through their LinkedIn profiles or from other sites—but I haven’t been able to confirm every name referred to me. Some people haven’t kept their profiles up to date on LinkedIn or on other sources. So if you can think of former Icos alumni who I’ve overlooked, or if you see any mistakes, please send us an e-mail at editors@xconomy.com, or to me personally at ltimmerman@xconomy.com. Or feel free to post a comment at the bottom of the story. I figure this is a starting point for what could be a valuable networking resource.

—Lee Adams, research scientist, Institute for Systems Biology

—Janet Adolphson, senior research scientist, AMRI

—Laura Afflerbaugh, research associate, Genentech

—Brian Albarran, senior scientist, Trubion Pharmaceuticals

—Lynn Allen, founder, Allen Clinical Research

—Dan Allison, senior director of therapeutic design, VLST

—Juli Ashburn, senior field force automation administrator, ZymoGenetics

—Eric Austin, senior toxicology consultant, Veritox

—Connie Ave-Teel, manager, lab support, CMC Icos

—Tim Axtelle, vice president of product development, Allozyne

—Susan Aznoff, owner, Petlane Pals

—Lauret Ballsun, owner, LBC Pharmaceutical Professionals

—Cari Barthe, recruiting project manager, NWRPros

—Ted Baughman, senior scientist, chemistry, Saltigo

—Chan Beals, senior director, Merck

—Kelly Bickley, quality control associate scientist, CMC Icos

—Julie Birashk, process development associate, CMC Icos

—Bodil Bjorner, development associate, CMC Icos

—Kyla Bjornson, senior research associate, Gilead Sciences

—Kim Black-Washington, director of marketing and strategic development, Xcelience

—Leonard Blum, senior vice president and chief commercial officer, Theravance …Next Page »

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I sat in on a good venture capital panel yesterday at Mobile Northwest 2009 in Seattle. No huge arguments or chair throwing to speak of (we’ll see what we can stir up at the next few Xconomy Forums). But some solid and useful observations from Geoff Entress of Voyager Capital, and also a prominent Seattle-based angel investor; Adrian Smith of Ignition Partners in Bellevue, WA, an expert in telecom and wireless; and Puneet Tandon of Bellevue-based T-Mobile USA, who is looking to sign partnerships with top entrepreneurs in digital media and social networking. (You can also see some comments from mobile VC Tom Huseby’s keynote here.)

The panel was moderated by Tricia Duryee, the Seattle-based correspondent for mocoNews, a website that covers wireless telecommunications. Here are my quick “top three” takeaways from the discussion of the local mobile industry:

1. The panic may be over, but caution rules. Entress says he’s added nine companies to his portfolio this year, out of a total of 32 he’s involved in (and six mobile firms, including TravellingWave, Swype, Dashwire, and Treemo). “We’re definitely not out of the woods yet,” he said. “But 2010 might be a good year for selling companies.”

2. It’s not all about the iPhone. Entress and Smith pointed out that Apple has only 17 percent of the smartphone market, so there’s plenty of opportunity on other platforms, like the BlackBerry and devices that use Windows Mobile. “Apple has a huge amount of mindshare,” Smith said, “but the critical thing is the development environment around [mobile applications].” Tandon agreed, saying, “Barriers to doing business with us [carriers] perhaps have been lowered.” Entress stressed the importance, especially for startups, of trying to avoid “getting locked into any one carrier, handset, or operating system.”

3. Watch advertising, input technologies, and connected devices. Tandon pointed out that by sometime next year, there are projected to be 3.3 billion Web-connected devices, and 70 percent of them will be connected via wireless operators. That means carriers will be willing to pay to know “who are the social influencers in your subscriber base,” he said. Smith and Entress said Google’s $750 million acquisition of AdMob signifies that mobile advertising is here to stay—but that the deal was the “first one out” (like YouTube for video), so don’t look for anything near that sort of valuation again. Entress added that he’s working with a number of startups selling new ways of inputting text on mobile devices (using speech recognition, touch-screen methods, and so forth). For all our fancy gadgets, it seems we still struggle to communicate.

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Framingham, MA-based Punchbowl Software, the company behind party planning site MyPunchbowl.com, said today that it has acquired the assets of I’m In, a group vacation website formerly owned by Waltham, MA-based GroupGo. Punchbowl’s founder and CEO Matt Douglas says the local search tools created by I’m In have enabled MyPunchbowl to launch a new local vendor portal where party planners can connect with small businesses.

“I had known the guys at I’m In from the local startup scene,” says Douglas. “They were building a group travel and local search product for the trip and travel world, and what impressed me most was their local vendor portal. They were doing a great job, and we kept an eye on them. Over time, the opportunity came to us to acquire the property, and long story short, I decided to pull the trigger. It’s not every day that a startup acquires another startup, but my investors and our board got together and said, ‘You know what, this is something that could really accelerate the company.’”

Punchbowl has acquired I’m In’s software code, designs, trademarks, and domain names, but hasn’t brought in any of its former employees. Douglas isn’t saying how much Punchbowl paid in the deal, but he says Punchbowl didn’t have to raise any new venture funding to make the purchase. The company’s most recent venture round of $2.1 million, supplied by Contour Ventures, Intel Capital, and eCoast Angels, came in September 2008.

Punchbowl earns revenue largely by generating sales leads for party vendors, so the new directory could be a big asset. “I can’t overemphasize how big of a project it is to launch a local vendor portal for 50 states and 30,000 cities—there are over 1 million vendors” in the new portal, says Douglas. “The technology we acquired will give us a huge head start, and we’re excited that we can finally talk about the acquisition and our new portal.”

Don Dodge—the former Microsoft emerging business team director who announced this week that he has accepted a position at Google—is on the board at Punchbowl. We profiled the startup shortly after its launch in October 2007.

GroupGo, meanwhile, was founded in 2005 by entrepreneurs and hotel-industry veterans Brian Harrington and Josh Lesnick and had backing from Annex Ventures. The company was known for helping groups of young adults plan so-called “girlcations” and “mancursions” to locations such as Napa Valley or Las Vegas. Boston.com profiled the company in 2007.

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The Securities and Exchange Commission is investigating whether a surge in call option trading on 3Com shares just hours before the announcement that Hewlett-Packard would take over the Marlborough, MA-based networking equipment maker for $2.7 billion was a result of insider knowledge of the deal, Bloomberg and other outlets are reporting today. Trading in call options—which guarantee the right to acquire a stock at a certain price—hit a 26-month high on November 11, just before the after-hours announcement of the acquisition. That “screams insider trading to the SEC,” Wayne State University law professor and former SEC attorney Peter Henning told Bloomberg, whose report was based on information from an unnamed source inside the agency.

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The second half of 2009 provided a good measure of optimism, easing some of the pain investors felt toward the end of 2008 and in early 2009. The stock market has been volatile but up significantly overall. There are signs of increased lending activity. Mergers and acquisitions have picked up. And there’s a pulse in the IPO market.

Yet despite indications of recovery, we shouldn’t be lulled into thinking we’re over the crisis. The labor, housing, and consumer markets are still struggling. And there’s still plenty of fear and uncertainty as we emerge from the longest downturn since the Great Depression.

Keeping that cautionary note in mind, what do the recent positive strands of hope in the IPO, M&A, and credit markets tell us?

To begin with, a potential increase in IPO listings isn’t necessarily a signal that capital markets have returned to normal. Why? Because the companies coming to market are the best of the best, the ones who have survived the past 24 months of havoc and have continued to build on sound business fundamentals.

And that’s the point—we’re not out of the woods yet; every company that wants to go public isn’t going to succeed. After the initial IPO backlog is worked down, the next wave of public offerings, if any, will continue to present a challenge and will come from specific sectors that investors see as the leaders in potentially expanding markets—for example, health care services and technology, financial services, and software and software services. Other, more traditional companies that can provide a compelling investor advantage and return will also be in the IPO mix.

Job growth in the health services and education sectors and annualized spending growth in the equipment and software sectors—ranging from 10 percent to more than 30 percent from Q3 2008 to Q1 2009, and evidenced by recent quarterly earnings growth by industry leaders—give some hint of recovery as well as an indicator of where the money may flow in the near future. Still, even though many institutional money managers need to invest and are waiting for the right opportunities—including IPOs—don’t expect to see a boom.

In fact, it may end up that growth will be fueled more by the credit markets than …Next Page »

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Some San Diego life sciences companies reported a burst of new financing, while embattled Sequenom told investors it’s trying to conserve its available cash. Here’s our rundown of the latest highlights:

—San Diego’s Trius Therapeutics, a venture-backed biotech developing a new antibiotic for treating acute and life-threatening bacterial infections, disclosed plans to raise as much as $86 million in an initial public stock offering. With additional funding, the company will proceed to Phase 3 clinical trials of torezolid, which Trius describes as a second-generation successor to linezolid, the Pfizer antibiotic known as Zyvox.

—Life Technologies (NASDAQ: [[ticker: LIFE]]), the Carlsbad, CA-based provider of biotech instruments and lab supplies, agreed to acquire Woburn, MA-based BioTrove, which has developed a high throughput gene expression and genotyping analysis system.

— SpectraScience, the San Diego medical device maker, has raised more than $4.3 million through a private placement that combines preferred shares and warrants. SpectraScience (OTCBB: [[ticker: SCIE]]) CEO Jim Hitchin told Bruce the offering closes a $5 million round the company began earlier this year.

—PaxVax, a San Diego startup backed by Seattle’s Ignition Capital, has raised $2 million of a planned $6 million investment round. The biotech founded in early 2007 is developing a new type of vaccine that is administered as oral tablets and avoids much of the requirements that conventional vaccines require.

—Sequenom, San Diego’s embattled diagnostics company, said it expects to end the year with $39 million in cash—but that’s not enough to get through 2010 without raising funds or slowing spending. In April, Sequenom (NASDAQ: [[ticker: SQNM]]) disclosed that it had “mishandled data” from a prenatal Down syndrome diagnostic test, indefinitely postponing that product launch.

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Life Technologies (NASDAQ: LIFE), the Carlsbad, CA-based provider of biotech instruments and lab supplies, says it has agreed to acquire Woburn, MA-based BioTrove, which has developed a high throughput gene expression and genotyping analysis system. BioTrove, which withdrew plans to raise $75 million in an IPO last year, says the flexible array format of its OpenArray technology enables researchers to perform more than 3,000 PCR or qPCR gene expression assays at a time. Financial terms were not disclosed.

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San Diego’s Gizmo5, which was rumored to be a Skype acquisition target for $50 million about three weeks ago, is now reported to have been sold—except the buyer is identified as Google, and the price is put at $30 million.

Both the Skype and Google reports were exclusives from TechCrunch’s Michael Arrington, who initially explained that Skype’s acquisition of Gizmo5 was the perfect backup plan in case Skype lost control of certain patents to its core technology that were the subject of lawsuits filed by Skype’s prospective buyers. Now Skype doesn’t really need Gizmo5, since eBay reached a comprehensive settlement with Skype’s founders last week. TechCrunch now says, citing “multiple sources with knowledge of the deal,” that Google has therefore stepped in to acquire Gizmo5.

Gizmo5, which was founded by Michael Robertson of MP3.com fame, provides free VoIP (Voice Over Internet Protocol) software and related technology for making Internet-based phone calls. After seeing the TechCrunch account earlier today, I sent an e-mail to Robertson asking, “Can you confirm? Can you discuss?”

He replied by e-mail, saying, “No and no. Can’t comment on any rumors. Sorry.”

The deal could make sense. While Google Talk is among Google’s many free offerings, the on-line chatting service is not set up to call specific phone numbers, and both parties in a call must have the Google Talk client running for it to work. TechCrunch says, anyway, that the Gizmo5 acquisition would enable Google to combine Google Talk with Google Voice, the application it has been testing that allows users to have a single phone number that connects to a variety of features, including conference calls, phone call recording, and text messaging.

While Google was mum on the Gizmo5 report at the time of this writing, it did confirm one acquisition today, saying that it has agreed to pay $750 million to acquire AdMob, a mobile display ad technology provider based in San Mateo, CA. Wade offers his perspective and some reaction among Boston’s mobile ad startups to the deal here.

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I was at the offices of uLocate, a Boston startup with a suite of location-aware information services for mobile phones, when I heard today’s news about Google’s $750 million acquisition of San Mateo, CA-based AdMob, which runs one of the largest mobile advertising networks. “It’s a very good thing,” commented Walt Doyle, uLocate’s CEO, who was clearly impressed by the figures involved. “It’s a very good thing that Google, or any company, is willing to pay close to a billion dollars for a company involved in mobile.”

And that’s the dominant message today from the mobile companies around Boston that I’ve reached about the AdMob deal. No one’s fretting (publicly, anyway) that a Google-AdMob combination will overrun the still-fragile market for mobile advertising, or that there’s one less exit path for other startups, now that Google has already bought itself a mobile ad network. Instead, the consensus in the company’s public statements is that Google’s move offers an important boost for the whole mobile media industry.

“We actually think it’s great for the industry, because it really shows the importance of the mobile advertising market, and how important it is for advertisers and publishers to have access to mobile specialists who know how to make the most of that medium,” says Lynn Tornabene, chief marketing officer at Waltham, MA-based Quattro Wireless. Quattra presents itself, of course, as one of these specialists—it works with major brands such as Ford, Netflix, Procter & Gamble, and Visa to get their ads into the most advantageous mobile venues.

“Google is a sophisticated company with deep resources, and yet they really saw the need to acquire a specialist to gain traction in the space,” Tornabene says. “So that really validates the business model of all the mobile ad networks.” (By the way, when it comes to Google, Tornabene knows what she’s talking about—she used to be head of communications for Google’s DoubleClick division.)

That word “validates” came up a lot today. “The announcement is causing tremendous excitement as it validates the enormous potential of mobile advertising,” says Paran Johar, chief marketing officer at Jumptap, a Cambridge, MA-based provider of targeted mobile ads. “We predicted consolidation in the industry and Admob’s broad high volume business model is highly synergistic for Google.”

The $750 million price tag—making Admob Google’s third largest purchase ever, after the $3.1 billion deal to buy DoubleClick and the $1.65 billion purchase of YouTube—surprised some observers today, including me. (AdMob had raised some $46 million in financing since its founding in 2006 from Silicon Valley venture firms Accel, DFJ Growth Fund, Northgate, and Sequoia Capital, which makes the Google acquisition an extremely lucrative exit by current venture standards.) The odd thing, to me, was that …Next Page »

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It was a busy week for local technology news.

—Two teams from San Diego and a third from Northern California demonstrated their development of advanced chemical sensor prototypes that are tiny enough to be found inside ordinary cell phones. The U.S. Department of Homeland Security is funding the Cell-All program, with a goal of basically creating an anti-terrorism app for cell phones that would enable authorities to crowd-source chemical detection.

—MaxLinear has filed for its initial public stock offering. The Carlsbad, CA-based fabless chipmaker, which specializes in designing semiconductor-based television receivers, intends to raise about $100 million through its IPO. The market may be de-frosting a bit, with 47 IPOs so far in 2009, compared with 45 last year, and 272 in 2007.

—ProQuo, a San Diego-based Web 2.0 company that was founded in 2007, was quietly shut down after taking in a total of $15 million in venture capital from Menlo Park, CA-based Draper Fisher Jurvetson and San Diego-based Mission Ventures. ProQuo was never able to validate its business model; its website offered consumers a way to remove their names from mass-mailing lists for free, and the company planned to sell its optimized lists back to mass marketing companies.

—San Diego’s wireless industry group, CommNexus, celebrated the opening of EvoNexus, its free high-tech incubator, by announcing the selection of three more startup companies: EcoATM, MicroPower Technologies, and TetraVue. CommNexus CEO Rory Moore says EvoNexus is believed to be the first incubator that is completely free for startups—that is, it doesn’t even require an equity stake in participating companies, as most incubuators do.

—Jitterbug, the San Diego wireless provider that puts an emphasis on simplicity, has acquired MobiWatch, a Waltham, MA-based startup developing mobile personal emergency response services. A regulatory filing shows that Jitterbug’s parent, GreatCall, provided 630,000 shares of common stock to MobiWatch and its shareholders in a deal valued at $107,100.

—San Diego-based Networkfleet is using its technology to help companies that operate fleets of vehicles go green by monitoring engine emissions and ensuring that vehicles are operating efficiently. Co-founder Diego Borrego told me the company also expects to be a player as consolidations sweep through the fleet tracking industry.

—EcoDog, a Vista, CA, cleantech startup that has developed a device that helps homeowners sniff out savings in their electric utility bill, was named best of show at GadgetFest, the annual fall competition sponsored by CommNexus, the San Diego wireless industry group. EcoDog founding CEO Ron Pitt won over the crowd when he declared, “My product is the only product up here tonight that saves you more money than it costs.”

—San Diego-based cleantech startup EESG is looking to raise $1.2 million to expand the 10-employee company’s sales staff, purchase inventory, and ramp up public relations and marketing. The company’s founders told me they have raised about half so far, including $300,000 from Longboard Capital Advisors, a green investment firm based in Santa Monica, CA.

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Seattle-based Movaya Wireless, a mobile software startup, has been acquired by Digby, a mobile commerce firm based in Austin, TX. Financial terms were not announced. Movaya was founded in 2006 by Phil Yerkes and Stanley Wang, and recently has been focused on making digital goods storefront applications for the iPhone, Android, and other mobile Web platforms. The company has a development team in China that will serve as the basis for Digby’s operations in Asia.

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To a large extent, the story of San Diego-based Networkfleet is also an intriguing tale about co-founder Diego Borrego. The privately held company, which currently has more than 100 employees, is one of the nation’s largest providers of technology and services for monitoring the location and status of company-owned vehicles.

Borrego, a Mexican-American who says his first language was Spanish, helped start the company in 1999, quit when he realized he had lost his ownership stake, and rejoined Networkfleet before the business entered a period of double-digit growth. The 42-year-old engineer says his name is on about 10 of 30 patents issued so far to the 10-year-old company.

While wireless fleet management systems are what my Xconomy colleagues politely refer to as “mature” technologies (as opposed to our usual focus on the sweet spot of emerging tech), Networkfleet maintains that not all fleet management systems are alike. Many systems simply use global positioning satellite technology to monitor the locations of company-owned vehicles. Networkfleet’s technology also helps customers reduce their fleet operating costs and vehicle emissions by using the computerized sensors in every vehicle to monitor the vehicle’s performance and engine efficiency.

Diego Borrego

“There are processors now that control the brakes, the engine, transmission, airbags,” says Borrego, Networkfleet’s vice president of engineering. “There’s a rich set of information that we call diagnostics.” He views the technology as more of an IT challenge, because nowadays there is essentially a local area network (LAN) in every new car and truck that links together an average of 25 different computers. “Extracting that data from the vehicle, and somehow transmitting it (in conjunction with GPS) and turning it into information that can be used by fleet vehicle managers is the innovation,” Borrego says.

Networkfleet provides its Web-based service to customers that range from plumbing companies with 10 trucks to the state of Delaware, which operates more than 2,400 government vehicles. Networkfleet installs a piece of hardware that connects to the LAN in every vehicle, gathers information about the vehicle’s operation and transmits the data via cellular links to a data center operated by Networkfleet. Each customer’s fleet manager is given a login to Networkfleet’s website, where he or she can monitor the location of the company’s vehicles. Data about each fleet also can be converted into reports that fleet managers can use to schedule maintenance, optimize operations, and monitor driver behavior.

The company generated about $30 million in sales last year, a 45 percent gain in revenue growth over 2007 that made Networkfleet the second-largest company in the business (based on number of subscribers), according to Keith Schneider, Networkfleet’s president. (The largest is Trimble, a Sunnyvale, CA-based GPS technology company that acquired rival @Road in 2006 for $496 million.) Schneider says many of their competitors tend to specialize in narrow segments of the technology-based business, such as GPS-based vehicle location, advanced routing applications, and workforce management—and he sees the technologies converging. “The industry is poised for massive consolidation,” Schneider says.

The Networkfleet president indicated during our conversation that Networkfleet, which has been owned by the New York private equity firm Apollo Management since 2006, aims to take an active role in that consolidation.

Still, Networkfleet has taken a winding road to get this far—after beginning more than a decade ago on a strategy that came …Next Page »

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GenArts, the Cambridge, MA-based visual special effects startup, has added sparkles to its glints.

Which is to say, it has acquired a small St. Louis, MO-based company called Wondertouch that specializes in software that generates so-called “particle-based” special effects—think fireworks, explosions, smoke, clouds, comets, and pixie dust. Executives at GenArts say the technology nicely complements Sapphire, its own library of special effects, which is strong in area like flashes, lens flares, lightning, and glowing auras.

Along with Wondertouch’s technology, the Cambridge firm is acquiring its founding visionary, Alan Lorence, who will become a full-time developer at GenArts. Financial terms of the acquisition aren’t being disclosed.

“We’re really excited about this acquisition, as it fits GenArts from a number of angles,” GenArts CEO Katherine Hays told Xconomy. “First, particle technology has been a gap in our technology portfolio, and one our customers have been asking for. Second, Wondertouch has over 10,000 customers, and it’s a quite different group from the GenArts customer base in many ways, so it allows us to reach a broader set of customers. Finally, it allows us to bring Alan onto the team, which we couldn’t be more excited about.”

Increasingly these days, the special effects seen in movies and TV shows aren’t generated from scratch, but are built from customizable components provided by companies like GenArts and Wondertouch; these companies are in some ways the modern-day equivalents of manufacturers of fine-art oil paints such as Winsor & Newton. The Wondertouch acquisition will give GenArts customers single-stop shopping for a larger variety of special effects, Hays says. After some planned integration work—and the coming launch of a version of Wondertouch’s Particleillusions effects library that is compatible with Adobe’s widely used After Effects software—effects artists will have …Next Page »

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San Diego’s Arkeia Software, which specializes in affordable network backup software, says today it has acquired Kadena Systems, a Santa Clara, CA-based developer of data de-duplication technologies. Financial terms were not disclosed. Arkeia, which shipped the industry’s first network backup solution for Linux in 1999, says it plans to integrate Kadena’s technology in its system. Arkeia says Kedena’s chief technology officer, Tamir Ram, also will join Arkeia as chief architect.

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Seattle-based Amazon (NASDAQ: AMZN) said today its acquisition of online apparel and shoe seller Zappos, based in Las Vegas, has closed. The Zappos management team will remain intact, the company said. In a blog post, Zappos CEO Tony Hsieh said his board of directors has been “switched out,” and that the deal, worth about 10 million shares of Amazon stock, is valued at $1.2 billion, based on Friday’s closing price.

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“Ouch.” I’m sorry to say I didn’t write about the grand opening that drug giant Eli Lilly held in La Jolla yesterday for its new biotechnology center of excellence. I didn’t know about it.

I wrote last December about the difficulty of getting information from Lilly about the status of its plans to combine Applied Molecular Evolution and SGX, and suggested a more appropriate name for the facility might be “Lilly’s San Diego Biotechnology Center of Silence.” I was pleasantly surprised afterward when a Lilly media rep cordially reached out to provide contact information, and assured me that I’d be included when Lilly’s new eco-friendly center was opened. Oops.

It was my own fault, of course, for failing to spot the announcement that Lilly moved on the PR Newswire yesterday. What can I say? I got busy. Such is the nature of this business. The media demands a lot of hand-holding. (But then, Lilly did tell me I would be included.)

The center is officially known as the Lilly Biotechnology Center—San Diego. In its statement yesterday, Lilly says of the nearly 200 scientists based at the center, more than half are from AME, a local biotech that Lilly acquired in 2004 that specializes in biotechnology-based therapies built specifically from human proteins. Many of the rest are from SGX Pharmaceuticals, a San Diego startup that Lilly acquired in 2008 and merged into its discovery chemistry research and technology division.

I have to say I don’t have an excuse for this one either: In a speech in downtown San Diego today, Lilly’s chairman and CEO John C. Lechleiter declared that the engine of biopharmaceutical innovation is broken. In a statement released by Lilly, Lechleiter says, “At a time when the world desperately needs more new medicines—for everything from H1N1 to Alzheimer’s disease – we’re taking too long, spending too much and producing far too little.”

I’m sorry to report that I didn’t know about this in advance either.

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GSI Commerce (NASDAQ: GSIC), an e-commerce company that powers the online stores for dozens of prominent consumer brands, announced yesterday that it will purchase Boston-based Retail Convergence Incorporated (RCI) for $180 million in cash and stock and up to $170 million in follow-on payments, depending on RCI’s performance.

RCI owns both Rue La La, a private website that sells discounted premium designer clothing and accessories, and Smart Bargains, a more affordable online clearinghouse for clothing, jewelry, and home and kitchen goods. Rue La La is famous for being an invitation-only site generally limited to high-net-worth individuals. But GSI said yesterday that for a limited, 48-hour period, anyone can join Rue La La by going to www.ruelala.com/gsi.

RCI was funded in part by venture firm General Catalyst of Cambridge, MA. In a remarkably detailed press release, GSI, which is based in King of Prussia, PA, outlined the goals RCI will need to meet in order to earn the company’s shareholders the full $350 million purchase price. GSI said RCI is on track to earn at least $15 million in 2010 before interest, taxes, deductions, and amortization. But if it can hit $18.3 million in income that year, it will earn an additional $40 million in payments. If it earns $34.4 million in 2011, it will get an additional $55 million, and if it earns $51.9 million in 2012, it will get a final $75 million.

Smart Bargains was established in 2000 and purchased by RCI in 2008. Rue La La, which opened for business in early 2008, is one of the leading examples of a relatively new species of “curated marketplaces” that hold limited-time sales, often of overstocked or distressed merchandise, and often to a restricted clientele. It competes with similar sites such as Gilt.com, owned by New York-based Gilt Groupe.

Rue La La has more than 1.2 million members, according to GSI, and these members are extremely loyal, perhaps explaining how RCI attracted such a large purchase price: on any given day, GSI said, approximately 10 percent of Rue La La’s members visit the site, and have demonstrated a high repeat purchase rate.

Gilt has a slightly larger member base and daily traffic rate, according to Web traffic analytics firm Compete.com, but both sites have continued to grow unabated throughout the recession.

Ben Fischman, RCI’s CEO, said in GSI’s announcement that “The private sale sector is changing e-commerce through exceptional levels of virality, dynamic customer experience and highly engaged members.” He said that joining GSI would give RCI access to GSI’s technological infrastructure as well as its marketing services and brand relationships. GSI CEO Michael Rubin said Fischman will stay on as manager of Rue La La and Smart Bargains, and that RCI’s team of almost 200 sales associates will “remain intact” following the acquisition.

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San Diego-based Ligand Pharmaceuticals (NASDAQ: LGND) said today it has agreed to pay $3.2 million to acquire Metabasis (NASDAQ: MBRX), the developer of treatments for diabetes and high cholesterol. Ligand has also committed $8 million to finance Metabasis’ drug development programs within the next 42 months. The sale comes after a rough year for Metabasis, in which it ran low on cash, warned investors it might have to shut down, and CEO Mark Erion resigned for a new job at Merck.

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Working for the man. It’s what most entrepreneurs want to avoid at all costs. But if their startup gets bought by a big company, that’s often just what happens—at least for a while.

Although the acquisitions market for tech startups has been relatively soft during the recession, there have been a few recent local examples to draw from. I took a highly unscientific sample of how three Seattle startups are doing post-acquisition. I wanted to hear about the cultural fit, the level of autonomy, and so forth. Not surprisingly, the ones I talked to said their transitions have gone very smoothly. Maybe the surprising thing is that I believe them (well, mostly—they did have to be pretty vague about future plans).

Here’s an update on the three startups and their founders:

Ethan Lowry, Urbanspoon (acquired by IAC in February 2009, announced in April)

The transition has been “remarkably uneventful,” Lowry says. “They’ve been very hands off.” He says IAC (NASDAQ: IACI) has been very supportive of Urbanspoon’s restaurant site, and that his team touches base with the mother ship once a week. “There’s all sorts of discussions before you get acquired. They say you’ll run your own ship…you’re kind of nodding, but what’s it really going to be like?” Lowry says. “I’ve been through other acquisitions that left you feeling more ripped out of your culture.”

He does say, half-jokingly, that Urbanspoon has gone through a “huge shift for us”—growing from three to five employees (adding a developer and a customer service person), and relocating to an office with a better view of Lake Union in Fremont, about a mile away from the old digs on Eastlake Avenue.

Last week, Urbanspoon introduced its “Scope” feature for its iPhone app, which lets you discover restaurants on the street around you by adding visual info to the camera feed on the screen. “In the beginning of summer, ‘augmented reality’ got a little bit of buzz,” Lowry says. “We thought, ‘This is cool, but seems super-gimmicky.’ We started prototyping something, and quickly discovered it’s entertaining. It’s fun, but can solve a real problem.” He adds that Urbanspoon has about 7 million installs of its iPhone app, making the Scope the biggest augmented reality app so far.

IAC’s future plans for the company are under wraps, but Lowry says Urbanspoon is …Next Page »

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