From cloudy Seattle to the vast suburbs of Silicon Valley, we covered a lot of ground on MIT Sloan’s recent technology trek, which concluded with a leg in Boston.

The first stop was Seattle where it was predictably raining. Visiting Amazon, Microsoft, and Adobe, we came away with an appreciation for how much tech activity is actually going on in that city.

At Microsoft, we got to talk to alumni about what it’s like to work there. Yes, it’s a large company and therefore bureaucratic, they confessed. But, the huge plus is that they have the resources to work on some very innovative projects. Amazon also was big, but the theme there was its quirkiness. In addition to all of the desks being made out of doors, they also have whiteboards everywhere, even in the elevators. I made sure to leave an “MIT Sloan was here” tag in one of the elevators!

Adobe seemed like a more typical office where they provide a pleasant work environment with lots of exposed brick and wood. Overall, I could really see myself enjoying working in Seattle.

Moving on to Silicon Valley, it was noticeably sunnier and warmer. It was also a lot bigger. In Seattle, you could probably get by with just a bike and public transit, but good luck to anyone who tries that in Silicon Valley. Here, you definitely need a car. Being settled with a family might help too, as the area is comprised of endless suburbs punctuated by large office parks where the tech companies are located.

If you want to live where the action is, you’d need to get a job in San Francisco or do the 40-minute commute each way and hope for no traffic. I guess I should point out that Palo Alto does have a downtown, but it’s just two or three streets and most people would still have to drive there.

As for the tech companies, most of the ones we visited were in Silicon Valley and all offered quite a lot of amenities compared to what we saw in Seattle. Free food, gyms, yoga classes, dry cleaners, and acupuncture were just some of the perks you get at most of these companies. I guess they need these things to entice people not only to live away from the city, but also to work some pretty long hours.

For example, the employees at Facebook—who all seemed to be in their 20s—joked that working at some firms in the Valley is like working in a sweatshop. Employees are expected to work extremely hard, but they also provide an endless amount of food that includes a rotating candy of the week. Facebook keeps its employees well fed, caffeinated, and hydrated with the largest cafeteria of all the tech companies we visited.

Google had a similar environment with lots of … Next Page »

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Time for our roundup of the latest deals news from Bay Area technology companies, from biggest to smallest. And today’s biggest numbers are pretty big.

$1 billion—The approximate amount raised by social game maker Zynga (NASDAQ: ZNGA) in its IPO last Thursday. The company’s shares priced at $10 per share, momentarily giving it a market capitalization of about $7 billion, but shares are trading down about 10 percent day, at around $9.

$1 billion—The price fetched by Milpitas, CA-based NextG Networks, which said last week (PDF) that it has been acquired by Crown Castle International. NextG makes outdoor antenna systems, and Crown Castle is one of the nation’s largest owners of cellular network towers. Backers of NetxtG Networks included Abbott Capital Management, Accel Partners, Bridgescale Partners, Bay Harbour Management, Madison Dearborn Capital Partners, Meritech Capital Partners, New Venture Partners, Oak Investment Partners and Redpoint Ventures.

$400 million—The amount San Jose, CA-based Adobe (NASDAQ: ADBE) paid for online advertising optimization startup Efficient Frontier of Sunnyvale, CA, according to executives speaking in a quarterly earnings call last week. Adobe announced the acquisition Nov. 30.

$300 million—An investment in San Francisco-based Twitter from Saudi Arabia’s Prince Alwaleed bin Talal, according to a report today in Dow Jones VentureWire. The investment gives the prince a 3.6 percent stake in the microblogging company. [Update, 12/19/11 8:00 pm PT: Fortune's Dan Primack reported today that the prince's investment was a secondary trade, meaning he was buying shares from existing Twitter shareholders rather than providing new capital.]

$20.1 million—New funding for San Jose, CA-based SoloPower, according to a regulatory filing. Previous backers of the solar panel manufacturer include Hudson Clean Energy Partners; the company received a $197 million loan earlier this year from the Department of Energy to build a plant in Oregon.

$12 million—New funding announced today (PDF) for San Jose, CA-based EnVerv, a maker of chips for powerline communications for smart-grid applications. Benchmark, NEA, and Walden International contributed to the round. Xconomy’s Bruce Bigelow has more on the funding deal here.

$10 million—The amount Founders Fund has put into San Carlos, CA-based Pharmacofore in a funding round reported this morning by VentureWire. The company is developing opioid painkillers that are effective only when swallowed, deterring misuse by drug abusers.

$6 million—New funding announced last week for Burlingame, CA-based Carwoo, which helps car buyers get quotes online. The new money, which doubles Carwoo’s previous venture pot, came from InterWest Partners, Comcast Ventures, Blumberg Capital, and Raymond Tonsing. Xconomy profiled the Y Combinator-backed startup in October 2010.

$2.3 million—A new round of equity-based financing for San Francisco-based social video startup Spreecast, according to a regulatory filing.

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Video editing software is way too hard to use.

At least, that seems to be what most consumers think. It explains why most of the videos you’ll find on YouTube and other video sharing sites are so raw, with no cuts, titles, or other effects. Apparently, people have a hard enough time just getting video off their smartphones or videocams and onto the Web; they can’t be bothered to whittle their footage down to just the best parts, or to jazz it up with music, graphics, and the like.

Well, you know what? Consumers are right. Video editing is too hard, especially if your first exposure to the craft is through Apple’s Final Cut Pro, Adobe’s Premiere Pro, Avid Studio, or one of the other professional-level video editing packages. These programs are powerful, but they’re also finicky, time-consuming, difficult to learn, and hard on your computer. (Don’t even bother trying to run them if you don’t own the latest, greatest Mac or Windows machine.) Even entry-level video editing tools such as Apple’s iMovie and Avid’s Pinnacle Studio force users up a pretty steep learning curve.

At the opposite extreme from the professional editing programs are the automated video creation tools from startups like Animoto. To make a slick music video at Animoto, all you have to do is upload a collection of still photos and video clips and select a theme and a soundtrack tune. The startup’s cloud servers do the rest. It’s a great boon for busy people whose videos might otherwise languish on their cameras or hard drives; the only downside is that it takes all the creativity out of the process.

Now there’s a startup that’s trying to stake out some middle ground, by offering a freemium, cloud-based video editing tool that’s full-featured but easy to use, and doesn’t tax your computer. It’s called WeVideo, and it’s led by a Norwegian serial entrepreneur named Jostein Svendsen. If you follow the tech scene in Silicon Valley, you might have heard of these guys—they won a DEMOgod award at the Fall 2011 DEMO conference in Santa Clara, CA. But you probably didn’t know that the software was originally designed for schoolchildren in Scandinavia, or that the startup follows the same principles as the video game business—i.e., if it’s easy enough for kids to use, then at least a few adults should be able to figure it out, too.

I met with Svendsen last month and got the whole story behind WeVideo. I’ve also been trying out the system myself—the video below, made up of clips from a recent weekend trip to Mendocino, CA, is my first attempt. I spent about two hours making it, plus another hour to upload the original clips to the Web. (Story continues below video.)

Now, if you’ve done any video editing at all, you probably did a double-take two paragraphs back where I mentioned that WeVideo runs in the cloud (on Amazon’s EC2 compute infrastructure and S3 storage infrastructure, to be precise). Traditional video editing involves such large files that it’s almost the archetypal desktop application—it’s the last thing you’d expect to see migrating to the cloud. But that’s the whole point of WeVideo, and it’s the factor that Svendsen hopes will allow the company to pull ahead of the other consumer-level video editing providers.

“We’ve found a process which is extremely fast, easy to use, and efficient by utilizing the cloud to take away the bottlenecks on the desktop that have limited people, especially when they’re working with high-definition video,” he says. “Just like YouTube represented a new way of distributing video, we represent a new way of producing it.”

But is cloud-based video editing really ready for prime time? My experiments indicated that it’s close enough to be a decent alternative for non-professionals who might otherwise turn to … Next Page »

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Time for our periodic data-driven roundup of funding news, acquisitions, and other developments in the Bay Area business and technology sphere.

$270 million—The value of Yahoo’s acquisition of New York-based digital media company Interclick (NASDAQ: ICLK), announced yesterday. Interclick makes software that helps brands and agencies optimize their online advertising campaigns. Yahoo said the acquisition would help it “dramatically improve data targeted solutions and optimized returns for advertisers.” Today, Yahoo also introduced Livestand, a tablet-based news browsing application, and a number of other new consumer-facing products.

$120 million—The price reportedly fetched by San Francisco-based video ad management startup Auditude,which was acquired yesterday by San Jose-based Adobe (NASDAQ: ADBE). Auditude had raised about $38 million from Granite Ventures, Silicon Valley Bank, Greylock Partners, and Redpoint Ventures.

24 million—The number of de-identified patient records that will be used by new San Francisco startup 100plus as fodder for algorithms predicting patients’ future health. The startup, backed by an investment from Founders Fund managing partner Peter Thiel, debuted today, and explained that it will work closely with San Francisco based Practice Fusion—which offers a free, advertising-supported electronic medical record system for physician practices—to create the first consumer health app based on Practice Fusion’s datasets.

$15 million—The size of a Series C investment announced today for New York- and San Francisco-based SecondMarket. The funds came from the Social+Capital Partnership, the new venture fund created by former Facebook senior executive Chamath Palihapitiya, who joins the startup’s board of directors. Xconomy took a look at SecondMarket’s efforts to provide liquidity for employees of pre-IPO startups in an August profile.

$12 million—The size of a new round of equity-based financing for Palo Alto, CA-based music app maker Smule, according to a regulatory filing. Previous Smule backers include Bessemer Ventures, Granite Ventures, and Shasta Ventures.

$10 million—The approximate amount of venture capital raised by San Francisco-based SimpleGeo, which was acquired Monday by Portland, OR-based Urban Airship for an undisclosed sum. SimpleGeo offers services that let mobile developers add location-based features to their apps. Urban Airship, which is mainly known for its in-app notification technology, said the acquisition would enable it to “offer a complete mobile engagement platform…so that brands and developers can create cutting edge mobile apps.”

$7.2 million—The new size of a Series A funding round for Palo Alto, CA-based Platfora, according to an amended regulatory filing. Platfora said in early September that it had closed a $5.7 million round from Andreessen Horowitz and In-Q-Tel, the investing wing of the U.S. intelligence community.

18,000—The number of U.S. financial institutions where people can sign up to use SaveUp, a personal savings rewards program that went live in beta form this week. San Francisco-based SaveUp says users can earn prizes by saving money, paying down debt, and improving their financial knowledge.

650—The number of mobile publishers using MoPub‘s advertising platform. The San Francisco-based startup announced last week that advertisers and agencies can now bid for ad placement with these publishers using a self-service, real-time platform called the MoPub marketplace.

12—The number of new channels for Internet video content introduced today by Burst Media, a Burlington, MA-based subsidiary of San Francisco video search company Blinkx. The channels, which members of Burst’s advertising network can plug into their own sites, cover topics such as style, parenting, travel, entertainment, and food. Xconomy analyzed Blinkx’s acquisition of Burst Media back in May.

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Another Boston-area business software company exits the scene today via acquisition. Following in the footsteps of Gomez (and many others), Waltham, MA-based DynaTrace, which helps companies manage the performance of their software applications, has been bought by Detroit-based Compuware (NASDAQ: CPWR) for $256 million in cash. The deal closed on July 1.

DynaTrace has 180 employees worldwide, and “substantially all of these,” including the management team (led by CEO John Van Siclen), are expected to stay with the merged company, according to the press release. DynaTrace started in 2005 and was VC-backed by Bain Capital Ventures and Bay Partners. The company raised about $22 million in total financing, including $4 million at the beginning of this year. So the acquisition looks like a very strong exit for the investors.

DynaTrace had $26 million in revenues over the past 12 months, the release stated, and is expected to add between $35 million and $45 million to Compuware’s top line in fiscal year 2012.

Compuware counts among its big customers Google, Facebook, Yahoo, Adobe, Amazon.com, the BBC, USA Today, and Subaru (and now DynaTrace customers like Zappos, SAS, and Macy’s, if they weren’t already). The firm was founded in 1973 and went public in 1992. By acquiring companies like Gomez and DynaTrace, Compuware is making a strong move in performance management software and user experience for Web and mobile applications.

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These are two startups that aren’t household names in the Boston-area tech scene, but probably should be. One started in 2009, raised venture capital when it was tough to get in the downturn, and is currently adding new features and generating some buzz. The other started five years earlier, in 2004, bootstrapped itself to profitability, and counts among its customers the world’s largest retailer and the world’s largest bank.

One has a geeky, conceptual name that sounds like a small, green Jedi master. The other’s name is more literal and sounds like a Sith lord, if I had to pick a side. (You tell me which is more badass.)

Yottaa and SiteSpect are united by at least one common thread: the desire to make websites run faster. Though the companies are at different stages and have different challenges, they are competitive in the realm of Web performance optimization—software that recodes webpage content to streamline it for browsers. “It’s like scraping barnacles off a boat,” says Eric Hansen, founder and CEO of Boston-based SiteSpect, the elder company.

It’s also a relatively recent product direction for SiteSpect, which has built much of its core business on marketing technologies like A/B testing of website features, behavioral targeting, and mobile content optimization (e.g., iPhone vs. iPad). According to Hansen, who previously founded and ran Worldmachine Technologies, his current company is the only provider of this kind of software that doesn’t require page tags or changes to customers’ existing sites. Its customers include Walmart, Expedia, MTV, MSNBC, Staples, and CSN Stores.

Meanwhile, Cambridge, MA-based Yottaa started just two years ago with the idea of making “every website faster and better,” says founder and CEO Coach Wei, who previously founded Nexaweb Technologies and worked at Hopkinton, MA-based EMC (NYSE: EMC). Yottaa’s customers include mid-sized e-commerce and retail sites (e.g., CSN Stores again), sandwich shops, and Web marketing agencies. All want to monitor and improve the speed of their sites—and track the resulting impact on sales, conversions, and other business metrics.

My first thought was, hasn’t this problem been solved (like in 1999, or 2005)? Apparently the answer is no, if there are at least two companies going after it in Boston. Oh yeah, and last fall, Google’s team in Cambridge also released a free tool for webpage optimization, called mod_pagespeed. So it’s clearly a competitive and somewhat commoditized sector. (In case you’re wondering, companies like Cambridge, MA-based Akamai Technologies (NASDAQ: AKAM) tackle Web performance at the network level, whereas the newer companies focus on the browser level.)

SiteSpect sees its primary competition coming from Adobe (NASDAQ: ADBE) … Next Page »

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Quick, which Boston- and San Francisco-area venture firm has invested hundreds of millions of dollars into the burgeoning—and controversial—market of intellectual property and patent protection over the past five years?

If you said Charles River Ventures, you are correct. In fact, CRV is the only big venture investor behind Intellectual Ventures, the Bellevue, WA-based firm known for its unique (and often criticized) approach to the business of invention. Charles River says that, together with its limited partners, it has poured some $300 million into the company since 2006.

That’s an astounding figure, and it shows that Charles River is betting on intellectual property in a huge way—perhaps more so than anything else in its portfolio. Besides Intellectual Ventures, the VC firm is also invested in RPX, a San Francisco-based defensive patent aggregation firm, which filed for an IPO in January and plans to go public today—more on that coming in a separate story. (Kleiner Perkins Caufield & Byers and Index Ventures are also investors in RPX, which was co-founded by two former employees of Intellectual Ventures.) Yet most venture firms still treat the field of intellectual property as a bit of a scourge—or, at best, a fringe area—even though it has great ramifications for VCs and their startups. So why did CRV decide to take the plunge?

The story goes back to 2001, the year after Intellectual Ventures was formed, when Nathan Myhrvold, the company’s polymath, founder, and CEO (and Microsoft’s former chief technology officer), came to Boston and met with Izhar Armony, a partner at Charles River Ventures. After some intensive Myhrvold-speak—for example, “invention is the essence of innovation”—he drilled down to his main point. Venture firms, Myhrvold argued, spend almost all their money on things that are essentially commodities—engineers, business people, infrastructure for startups—but what’s actually unique, and arguably most valuable, is invention.

Many would disagree—people and execution are pretty essential to businesses, after all—but the seed was planted. “Nathan helped open my eyes to the notion that IP [intellectual property] is a very important market—it’s actually a very big market in tech,” Armony says. He adds that there’s a $50 billion-plus market in IP rights and licensing, versus a $6 billion litigation market based on legal fees.

So in 2003 he led CRV’s investment in Intellectual Ventures’ “invention science fund,” which aimed to create new inventions across a wide range of fields, in part by bringing together renowned scientists and inventors and brainstorming ideas in a structured way. Such “invention sessions” have led to major projects and spinouts such as TerraPower, the Bellevue, WA-based nuclear-reactor firm (in which CRV also became an investor). In total, CRV committed $39 million to the invention science fund, co-investing with the likes of Bill Gates and Microsoft.

But the really big business opportunity came along in 2006, when CRV and its limited partners decided to commit an additional $300 million—I’ll say it again, $300 million—to Intellectual Ventures’ … Next Page »

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Sometimes what’s bad for companies is good for business. That’s the case for a number of Massachusetts security software firms. These days, the Boston area seems to have renewed its claim as an epicenter of cyber security activity.

In the wake of the recent, much-publicized cyber attack on RSA Security, a division of Hopkinton, MA-based EMC (NYSE: EMC), I thought it would be a good time to check on efforts to meet new cyber threats by some local security companies. RSA classified the attack on its system last week as an “advanced persistent threat”—a phrase used to describe a sophisticated effort to target software applications, sensitive data, or end users—but the firm was vague about exactly how it was hacked, what kinds of data were stolen, and what risks its customers face. (RSA said it is working closely with customers, but security expert Bruce Schneier wrote in a blog post that “the company has lost its customers’ trust.”)

This kind of advanced threat is a far cry from the corporate hacking of the past couple of decades. Companies used to be able to defend themselves from rogue hackers by deploying technologies around the perimeter of their network—such as firewalls and “deep packet inspection,” which detects things like viruses and worms as they enter the network. But advanced persistent threats are what defense and intelligence agencies are used to seeing from nation-states (from China to the Middle East to Eastern Europe) trying to hack into government databases—except now their targets include banks, insurance companies, tech firms (Google, Adobe, and others), and critical infrastructure like energy and chemical firms.

All is not lost yet. In addition to big companies like EMC/RSA (which also includes security technology from Network Intelligence), a number of smaller but established software companies are working on ways to combat the latest security threats. One of these companies is Fidelis Security Systems, a nine-year-old firm in Waltham, MA, that is giving corporations and government agencies the ability to continuously identify and analyze threats from within their networks, down to the level of applications, files, and individual sessions.

That’s apparently crucial for fighting advanced persistent threats, which can take the form of anything from malware embedded in a PDF file to tricking an employee into accessing a website and then exploiting a software bug. “When somebody decides to make you a target, they will persistently and, in a very targeted way, try to infiltrate your network,” says Fidelis CEO Peter George.

One big emerging trend is government agencies working together with corporations to try to thwart such attacks. This increased cooperation was evident at the RSA Conference in San Francisco last month, George says, where a number of forums and panels featured “three-star generals sitting side by side with business leaders.” The U.S. government, he says, is “working in collaboration with the biggest enterprises in the world to show them best practices, to show them how to fight advanced threats.”

All of this points to a major mindset shift when it comes to corporate data security. “Organizations should continue to act under the assumption that the attackers are already inside, rather than dedicate excessive time and resources to securing their perimeter,” says Adam Bosnian, executive vice president at Cyber-Ark Software, a Newton, MA-based security company that specializes in managing privileged users and protecting against insider threats, among other things.

Fidelis and Cyber-Ark are part of a thriving cluster of Boston-area security companies … Next Page »

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If you’re a Web geek, you know all about the death match between Flash and HTML5. Even if you’re not, you’ve probably heard at least in passing about the controversy over Adobe’s proprietary video and animation platform, and how Apple won’t provide support for Flash videos on its mobile devices, and how Steve Jobs and many others think that the future of multimedia lies with HTML5—the latest revision of the Web’s basic structuring language, which includes support for open-source video standards.

But you probably didn’t know that the Flash-HTML5 battle spills beyond video and animation into other areas of the Web, such as document sharing. About nine months ago, “social publishing” startup Scribd, which lets users post and share office documents online, embarked on a huge project to convert all of its site content from Flash to HTML5; the Y Combinator-spawned company said at the time that it wanted to “deliver an impressive reading experience across all browsers and web-enabled devices, without requiring add-ons or plug-ins.” But Scribd’s embeddable document reader still uses Flash, meaning that Scribd documents might not show up correctly outside of Scribd’s own website.

Now Scribd has been leapfrogged—and by another Y Combinator-backed startup, of all things. Boston- and San Francisco-based Crocodoc, which emerged from Y Combinator last spring, today released the world’s first embeddable HTML5 document viewer. (You can see an actual example on page 2 of this article.) That may sound like a pretty nerdy milestone, but it means that developers who adopt the viewer will be able to integrate PDF, Word, and PowerPoint documents into any website or document sharing system without requiring end users to run Flash, Acrobat, Word, or other programs or plug-ins. It also gets Crocodoc one step closer to being able to show such documents even on mobile devices such as iPads and iPhones.

Yammer, the San Francisco-based maker of a popular enterprise instant messaging and social networking system, has already built the Crocodoc viewer into its software. “Crocodoc gives Yammer users a great document viewing experience right inside our site,” said Yammer chief technology officer Adam Pisoni in a statement about the new viewer.

Ryan Damico, Crocodoc’s founder, argues that “HTML5 is really the way of the future.” Converting any PDF, Word, or PowerPoint document into an active Web document means that users can “select text, search, zoom, scroll, or do anything you want with it, as opposed to being stuck in Adobe or Flash. It’s super-fast and it looks great.”

While the new embeddable viewer can’t be used to actually edit documents, it can be used to annotate them, essentially by … Next Page »

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Performable is one of those startups that sounds cool, but who really understands what it does? Until recently, not that many people outside the Cambridge, MA-based marketing technology company.

To learn more, I met with David Cancel, Performable’s founder and CEO, at the startup’s cavernous new digs near Central Square. As he admits, marketing technology is a “non-sexy” topic that’s not easy for laypeople to grasp (or journalists to write about). But that has also allowed the startup to stay mostly under the radar while it has grown to about 15 employees and hundreds of corporate customers.

In a nutshell, Performable makes software that helps companies automate marketing processes and sharpen their marketing analytics down to the level of individuals and actions. That means—unlike Google Analytics, say, or other big players like IBM (with Unica and Coremetrics) or Adobe (Omniture)—Performable tries to provide information about how each consumer interacts with a given brand across different websites, social media, and devices.

It’s a much broader vision than the Web page testing tool that Performable was originally known for, though Cancel says that tool is still a significant part of the company’s revenue. (About a year ago, my colleague Wade wrote an in-depth story about the early days of Performable and its genesis based on Cancel’s previous experience at Compete, the online marketing firm that he co-founded.)

Performable sends customers a daily e-mail that reports activity and trends happening with their websites. Through a software-as-a-service model, customers install a Web analytics tool and a marketing content management system (which includes the landing-page testing tool). The software tracks and displays each interaction with each customer—with special attention to which Web pages, e-mails, or phone calls generate clicks and revenue—and provides specific recommendations for how to boost things like conversion rates and search-engine traffic.

The startup is part of a growing mini-cluster of marketing-related tech companies in … Next Page »

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One of the most important decisions anyone makes is deciding where to live. Lucky for me, that decision has already been made. Since I’ll be graduating soon with an MBA from the MIT Sloan School of Management, I thought it would be great to head out West to where the software revolution began: the emerald city of Seattle, WA.

Now, I understand what some of you may be thinking: why the heck would anyone want to live in Seattle? I mean, doesn’t it rain like 10,000 inches per year? And aren’t they just a bunch of granola eating, rock band wannabes? What kind of job opportunities exist out in Seattle anyway?

I recently had the opportunity to help organize a “Seattle Tech Trek” for some of my MIT classmates (as well as the Harvard Business School, who helped set up a “startup mixer”). While many of us have roots in the technology scene, a large majority are obsessed about tech startups. Most are interested in either a) working for a small technology company, or b) starting our own venture (and if anyone is looking for good talent, please e-mail me for a list of resumes). Approximately 30 of us made the trip from Boston out to the Pacific Northwest and toured some of the area’s premier technology companies, both large and small.

I realize some of you may be biased toward the East Coast, especially since the majority of readers reside in Boston where Xconomy got started. But, I want you to keep an open mind especially if you’ve never been out West before. What follows is my “elevator pitch” for those who are contemplating whether they should move to Seattle, post-MBA.

First, and probably most obvious, Seattle is home to some of the most innovative technology companies. Yeah, sure, there are the “old timers” such as Microsoft, Amazon, and Expedia. I mean, everyone knows about those guys, right? Well, yeah—but there are also some up-and-comers which some of you may have never heard about: Impinj (RFID semiconductors), Farecast (travel, sold to Microsoft for $115 million), Isilon Systems (storage, acquired by EMC for over $2 billion), Big Fish Games (online games), DocuSign (digital signatures), AdReady (online display ads), Tableau Software (Web data), PayScale (salary data), Picnik (photos, acquired by Google), and Off & Away (travel deals). While the Bay Area may host its fair share of startups, rest assured Seattle is doing its best to stay in the running.

And, speaking of the Bay area, look at all the Silicon Valley companies who are opening offices in Seattle. Facebook recently opened an engineering center (currently the only other office besides its headquarters in the Valley), while Google, Cisco, Adobe, and Salesforce.com all have satellite offices in Seattle as well. There’s probably a host of others I’m forgetting, but these stand out to me. (Side note: my MIT Sloan colleagues also put together a “Silicon Valley Tech Trek” as noted here by MIT Entrepreneurship Center director, Bill Aulet. )

Second, and probably most important, is the Pacific Northwest “entrepreneurial … Next Page »

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[Updated 12:30pm ET, see below.] OK, we knew this was coming—it was just a matter of when. Hopkinton, MA-based data storage giant EMC (NYSE: EMC) announced today it will acquire Seattle-based Isilon Systems (NASDAQ: ISLN) for $2.25 billion in cash. EMC is paying $33.85 per share, a 29 percent increase over Isilon’s previous closing price of $26.29. (Takeover speculation drove Isilon’s stock up to $26-28 in the past few weeks, and the high price of the acquisition has reportedly been an issue in negotiations.)

The deal, which should be completed by the end of the year, fits with EMC’s broader strategy of growth through acquisitions. Technology-wise, Isilon fills a need for EMC in the area of network-attached storage, which is a way for companies and organizations to manage huge amounts of data for multimedia, online services, and other applications. The acquisition is one of EMC’s biggest—even larger than the $2.1 billion purchase of Data Domain last year. The latter deal has been quite successful for EMC, so we’ll see if it follows the same game plan for integrating the Isilon team—that is, leave the technology and sales teams intact and add massive distribution.

Isilon has a long history of ups and downs. The company started in 2001, co-founded by former RealNetworks engineer Sujal Patel. The idea was to provide cheaper and more efficient data storage for companies needing to host or deliver multimedia content that requires lots of storage space. Isilon attracted venture funding from Madrona Venture Group, Atlas Venture, and Sequoia Capital.

Data storage was (and still is) a brutally competitive field, but Isilon’s technology set it apart. Its approach was to cluster together a large number of storage “bricks”—each one including disks, memory, processing, and networking—into a single storage unit. This was an inventive way to do network-attached storage, which is now a multibillion dollar industry.

Isilon flew high and raised $108 million in an IPO at the end of 2006. Then things started to go bad. Very bad. By the next year, the company was failing to meet its own sales projections, and its stock price had plummeted. Patel, who was then chief technology officer, was appointed CEO in late 2007, to turn things around.

It has been a long road back—focusing on R&D, making product distribution more efficient, and hiring a new senior management team. But early this year, Isilon posted its first quarterly profit in its 10-year history. Its customers include Sony, XM Radio, LexisNexis, Facebook, MySpace, Kodak, Adobe, major movie studios and TV networks, government agencies, and biomedical research organizations (a particularly fast-growing sector).

Some in Seattle will lament the loss of a mid-size public tech company that is owned and operated locally. Judging from EMC’s way of doing business, though, Isilon’s team and employees probably will remain in Seattle. If it’s a good cultural fit, the acquisition should help Isilon’s business expand globally.

And Isilon’s venture investors should make out very well from the deal. At last count, Seattle-based Madrona Venture Group still owned some 5.8 million shares of Isilon and has representation on its board (Matt McIlwain). What’s more, Isilon’s chairman is Bill Ruckelshaus, one of Madrona’s strategic directors. Madrona’s remaining stock amounts to about $196 million by the terms of today’s deal. Not too shabby, considering Isilon raised less than $70 million in total venture financing (by my count) prior to its IPO.

Reached by phone today, Madrona said it invested a total of $15 million in Isilon and expects its overall return to be 15-20 times its investment. Not to be outdone, Boston-area-based Atlas Venture, Isilon’s largest shareholder, said its proceeds are $473 million, and its multiple is 20x. [This paragraph was added to provide more VC specifics---Eds.]

We’ll be watching to see what people have to say about the deal—and how the integration of Isilon into EMC goes.

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Last week was an unusual one at Xconomy San Francisco: it was practically all energy news, all the time.

—On Tuesday I profiled Recurve, a San Francisco startup that’s systematizing the science of home energy audits and retrofitting using its own in-house software. The company eventually hopes to conduct energy audits and retrofits on a massive scale as a way to help utilities reduce electrical demand.

—I had a fascinating conversation with Danny Kennedy, the founder of Oakland, CA-based solar startup Sungevity. He told me all about the company’s business, which is to make it as frictionless as possible for homeowners to finance and install photovoltaic panels on their houses, and about his background as a former activist and administrator at Greenpeace—and how he made the switch to energy entrepreneurship.

—Japanese electronics giant Sharp said it would acquire Recurrent Energy of San Francisco for up to $305 million in cash. Recurrent develops distributed energy generation facilities for utilities.

—Reports surfaced that Oakland, CA-based BrightSource Energy, which has contracts to build large-scale solar energy plants that will supply electricity to PG&E and Southern California Edison, is preparing for an initial public offering.

—And in non-energy news, I spoke to one of the founders of Whereoscope, whose iPhone app sends alerts to parents every time their iPhone-toting children arrive at a specified location, such as school or soccer practice. Whereoscope participated in the Summer 2010 term of the Y Combinator startup incubator program; I’ve been profiling as many members of that class of startups as I can make time for.

—Speaking of Y Combinator, I visited Anybots, the Mountain View, CA, robotics startup that shares quarters with the incubator. Founder and CEO Trevor Blackwell told me how the company developed its concept for telepresence robots that help office workers in remote locations communicate in a more immersive, informal way than conventional teleconferences allow. And I shot a video starring Blackwell and Suzanne Brocato, the startup’s “virtual receptionist,” who was logged into an Anybots QB robot from her home in Martinez, CA.

—Greg wrote about the passel of lawsuits filed lately against Silicon Valley companies by Boston-area tech companies, including Everyscape’s suit against Adobe, Skyhook Wireless’s suits against Google, and Helicos BioSciences’ suit against Pacific Biosciences.

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Things are evolving quickly over at DataXu. Six months after announcing a new $11 million round of venture financing, the Boston-based online advertising software firm has expanded its focus to help its corporate customers reach a wider swath of consumers wherever they are.

Earlier this week, DataXu (pronounced “Data Zoo”) rolled out what it calls “the industry’s first three-screen demand side platform.” That’s online ad-speak for giving digital advertisers new tools for optimizing how, when, and where they place ads across the Web, video, and mobile devices. So the company now gives buyers of online display ads a way to make spending decisions across these separate digital channels.

“It’s a big change for us—a big addition,” says DataXu CEO Mike Baker, who was previously a vice president with Nokia (after its acquisition of his startup Enpocket). Baker is also an active angel investor in digital media, and was formerly a partner at venture firm GrandBanks Capital.

DataXu’s core technology helps online advertisers decide which ad purchases are most likely to pay off in terms of click-throughs and conversions. It analyzes dozens of parameters such as the location of the viewer, the day of the week and time of day, and the content of the ad. The software does all of this 100,000 times (or more) per second, “learning” as it goes by measuring actual click-through rates for ads the engine has placed. The startup’s 50-odd customers include big companies such as Ford, American Express, and Adobe, says Baker.

By expanding to mobile and video, DataXu is positioning itself as one-stop shopping for advertisers who want real-time information on consumer behavior across all available digital channels—especially mobile advertising, which might finally be ready for prime time. The company’s new product includes tools to measure consumer intent through surveys and other kinds of engagement metrics, Baker says.

Still, DataXu plays in a crowded and noisy sector, with hundreds of startups … Next Page »

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OK, four lawsuits filed in a month—all in the same direction—makes a trend. (Though two are from the same company.) September is shaping up to be the month of Boston versus Silicon Valley, when it comes to tech and life sciences companies trying to protect their intellectual property.

—The news today is that Newton, MA-based startup EveryScape is suing San Jose, CA-based Adobe Systems (NASDAQ: ADBE) over copyright infringement. Mass High Tech has the details here. EveryScape, which makes software for creating 3-D virtual environments from digital photos (both indoors and outdoors), alleges that Adobe infringed on two copyrights that protect a graphics editing technology called “structure preserving clone brush.” According to the report, the suit alleges the technology had been developed by EveryScape founder Mok Oh as a plug-in to Adobe Photoshop, and that Adobe later released a Photoshop feature called Vanishing Point that copied it.

—In a case that is shaking the arena of location-based mobile technologies to its core, Boston’s Skyhook Wireless filed two lawsuits last week against Mountain View, CA-based search giant Google (NASDAQ: GOOG). The first suit alleges that Google interfered with contracts Skyhook had signed with Motorola and Samsung to put Skyhook’s location-finding software on mobile phones that run on the Google Android platform. The second suit says that Google’s location-finding technology infringes on four Skyhook patents issued between 2007 and 2009. Skyhook is seeking injunctions and monetary damages. “What’s really at stake,” my colleague Wade wrote, “is who will have access to the bonanza of location data generated by consumers using location-aware applications on their mobile phones.”

—Meanwhile, biotechies can also litigate with the best of them. Earlier this month, Helicos BioSciences (NASDAQ: HLCS) the Cambridge, MA-based maker of gene sequencing instruments, filed a lawsuit accusing Menlo Park, CA-based Pacific Biosciences of infringing on four patents that cover single molecule sequencing technologies. Helicos is seeking an injunction and monetary damages. PacBio, for its part, filed paperwork last month for what it hopes will be a $200 million IPO, as my colleague Luke reported.

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Where are app stores going next? For the past few years, the app store model has spread through the wireless ecosystem like wildfire. There have been a few big winners and lots of…well, losers is probably too strong, but let’s say there are a lot of app stores that have yet to reach critical mass.

App stores can be measured by the three Ds: Distribution, Developers, and Downloads. How many devices have the store, how many developers are building apps for the store, and how many consumers are getting enough value to actually download something from the store? This is what makes it so hard to break in—it’s an outrageous amount of work (and marketing) to line up distribution and developers so that you can get a critical mass of downloads.

Yesterday in San Francisco, Intel threw its hat into the ring. Building on its announcements at the annual Intel Developer Conference, Intel announced the full release of its “AppUp Platform”—a new app store for notebooks and mobile devices. AppUp is a storefront that’s neither hardware nor OS dependent. Although it is being launched for Windows, it will support the MeeGo Linux platform (developed jointly with Nokia) when it launches, and it will be available across netbooks, phones, and a forthcoming zoo of in-between devices. It supports a variety of runtimes—Adobe AIR and C++/Win32 natively, with wrappers available to enable Silverlight, .NET, and more. [Editor's note: The author contributed content to the AppUp conference.]

But Intel’s first target is the massive installed base of netbooks, estimated to be over 100 million strong. Conference attendees were quick to ask, “Why netbooks?” Intel answered with projections of over 500 million devices that would be capable of utilizing the AppUp platform within five years. That’s a huge revenue potential that would dwarf what Apple and Google have been projecting for their respective platforms.

And Intel wasn’t ignoring the app store out of Cupertino, either. Demos at the session highlighted a simplified process to get iOS apps running in the AppUp store. That has to be tempting to Apple developers—an ability to leverage their development investments across a much larger market.

A fascinating development along with the AppUp launch is that Intel is welcoming alternative storefronts. That means a company can create a custom user interface with all or some of the AppUp apps, using Intel for transaction fulfillment. Adobe, for example, is launching the Adobe AIR Marketplace—a storefront that highlights AIR apps (and only AIR apps) in the AppUp marketplace. They decide what to carry and what to highlight; Intel handles the dirty work. Intel even allows “shopkeepers” to charge app vendors for premium placement, and collects the proceeds on their behalf.

Does the world need another app store? It’s tough to say. On the one hand, it will be a nightmare of marketing for Intel to get mindshare amid a sea of alternatives. On the other, I would be loath to bet against Intel’s marketing muscle—and they are targeting a massive market with a unique value proposition.

Will they nail the three Ds? I don’t know, but I’m looking forward to finding out.

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Edmund H. Shea Jr., a venture investing pioneer at San Francisco-based investment bank Hambrecht & Quist in the 1960s, passed away August 13 at his home in San Marino, according to an announcement today from J.F. Shea Co., Inc., the family-owned civil contracting and home-building company Shea helped to lead. Between 1960 and 2000, Shea invested personal and family funds in hundreds of startups, including Activision, Adobe, AES Corporation, Affymax, Altera, America West Airlines, Brocade, Compaq Coputer, Fabrinet, Genentech, and Peet’s Coffee & Tea. Shea also managed big J.F. Shea construction projects such as the Berkeley Hills tunnel and underground stations for the Bay Area Rapid Transit and Washington D.C. Metro systems.

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What summer doldrums? The startup launches, venture financings, and M&A deals were flying about as fast as they come last week.

—I got the inside story on OpenAppMkt, a new marketplace for Web apps for the Apple iPhone, from co-founder Teck Chia. The service, which went live on Friday, is similar to the iTunes App Store for native apps, but is designed to help iPhone owners find free and paid apps that run inside the phone’s Safari Web browser.

—We profiled Triangulate, a Palo Alto, CA-based startup that recently raised $750,000 to work on its Facebook dating app for singles. The app, called Wings, makes matches based on personal details drawn from users’ social media streams, including Facebook, sparing them from having to fill out lengthy eHarmony-style questionnaires.

—I took a close look at LearnBoost, a startup at San Francisco’s Pier 38 that will soon release an online gradebook and other Web-based tools for teachers. The startup, which just raised $975,000 in venture and angel funding, hopes its software’s clean and easy-to-use interfaces will help it take market share away from big incumbent suppliers of student information systems like Blackboard and Pearson Education.

—There were two giant deals last week in the social gaming sector. Disney (NYSE: DIS) said it would acquire Mountain View, CA-based Playdom, maker of top MySpace and Facebook games like Social City and Sorority Life, for as much as $763 million. And Japan’s SoftBank invested $150 million in San Francisco-based Zynga, which makes the even more popular Facebook games FarmVille and Mafia Wars. Zynga and SoftBank plan to launch a new joint social gaming venture in Japan.

—I got a realistic, reasonably upbeat assessment of the venture industry’s near-term prospects from Scale Venture Partners co-founder and National Venture Capital Association chairperson Kate Mitchell and SVP general partner Rory O’Driscoll. Mitchell says venture funds will continue to shrink in resources over the next two to three years, but that it’s still a great time to invest.

—Xconomy founder Bob Buderi published a two-parter based on his interview with Henry McCance, chairman emeritus of San Mateo, CA-based Greylock Partners. Part 1 looked at why Greylock relocated its main office from Waltham, MA, to Silicon Valley, and Part 2 focused on McCance’s thoughts about the personality traits that go into being a great venture investor.

—At O’Reilly Media’s Maker Faire in Detroit, Menlo Park-based TechShop, a network of open-access hackerspaces, announced that it would work with Ford to open a TechShop branch in the Detroit area, as our Detroit correspondent Howard Lovy reported.

… Next Page »

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It’s been a busy week already when it comes to acquisitions and venture deals in San Francisco and Silicon Valley. There’s too much going on to write it all up separately, so here’s a quick rundown:

—After operating for just two and a half years and raising $76 million in venture funding, Mountain View, CA-based social gaming giant Playdom will be acquired by Burbank, CA-based Disney (NYSE: DIS) for $563 million plus up to $200 million in follow-on payments, dependent on the company’s performance. Playdom games like Bola, Market Street, Social City, and Sorority Life are among the top social titles on MySpace and Facebook. The startup’s investors included Bessemer Venture Partners, Lightspeed Venture Partners, New Enterprise Associates, New World Ventures, Norwest Venture Partners, and Steamboat Ventures.

–Adobe (NASDAQ: ADBE) in San Jose, CA, will buy Day Software, a Zurich, Switzerland-based maker of content management software for companies maintaining large websites, for roughly $240 million. Software made by Day, which went public on the Swiss Exchange in 2000, is behind the websites of many Fortune 1000 companies, including Adobe. I wrote last fall about Day’s decision to move its U.S. headquarters from Newport Beach, CA, to Boston.

—San Francisco-based Nexant, a provider of grid management software to electric utilities, has raised $32.5 million in a venture financing round that could total $50.4 million, according to a regulatory filing yesterday. The funders were not identified, but past investors in Nexant include Beacon Group, Bechtel Capital Partners, IBM, MIC Capital, Morgan Stanley, and Nth Power Technologies, according to VentureWire.

—CloudMade in Menlo Park, CA, announced that it has raised $12.3 million in Series B funding. The company creates software tools that allow makers of mobile and Web-based applications to incorporate maps based on data from the crowdsourced OpenStreetMap project, which was started by CloudMade co-founder Nick Black. New investor Greylock Partners led the round, which also included original investor Sunstone Capital.

—San Jose-based BlueArc, which makes network storage systems for large enterprises, has raised $20 million in new financing from a group of 31 investors, according to a regulatory filing and a company announcement. Investor Growth Capital, the venture capital arm of Sweden’s Investor AB, led the round.

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Tableau Software has made it clear over the past year that it is one of the rising stars of the local software community. Spun out from Stanford University in 2003, the company has spent the last seven years carving out a global market of businesspeople and consumers itching for a new product to help them sift through mounds of data efficiently, and even having a little fun.

The company has sought its answer through taking something that causes most people a headache—staring at an unorganized document full of data and attempting to make sense of it—and transforming that muddle into graphics and visualizations that are easy to create, and manipulate, to get the most out of the information as possible.

“Working with data is like the web search before Google—it’s a pain! It’s cumbersome, it’s difficult to use, and it’s hard to just answer questions that you have,” says CEO Christian Chabot. With Tableau, he adds, anyone who can use a computer can have a “nice free form canvas for exploring and visualizing the data,” transforming lengthy spreadsheets into moldable graphic representations.

“Wherever there is a pile of data, we think it’s too hard for people to ask it questions. We just make that really easy. And it’s a product that pretty much anyone can use,” he says.

Although titles like “business intelligence software,” and “data visualization” don’t immediately stand out as the sexiest products on the market, Chabot begs to differ. In the last year, the company has more than doubled its sales, and is raking up some high-profile clients, including Apple, UNESCO, Logitech, Vanguard Health Systems, Zynga—even the Dallas Cowboys.

Christian Chabot

Tableau is privately held and doesn’t have to disclose its financial reports, but it has said it generated a 106 percent increase in its sales in the first half of 2010, compared with the same period a year earlier. The company said it grossed $20 million in revenue in 2009.

“Tableau is experiencing just tremendous sales and customer growth,” Chabot says. “Of the last 22 quarters, 21 of them have had consecutive sales and customer growth. So the business is just building, and building, and building, and building.”

After years of development, Tableau, priming for expansion, moved from what Chabot affectionately referred to as its “startup office,” to a more spacious Fremont spot looking out on the Ship Canal and Aurora Bridge, and right next to software giant Adobe, last summer. But the company’s reach is clearly moving beyond its expanded Fremont offices. In January, the company boasted record sales with a modest 100 employees. Today Tableau has 136 employees, and Chabot estimates they will be hiring another 100 in the next year.

“Essentially we’re just seeing incredible success with our products we invented and they’re really taking off in the marketplace, and accordingly, we’re hiring up a storm. And we’re very anxious to tell people in Seattle that news because we’re always looking for great people.”

It is difficult for Chabot to hide his excitement about the future of Tableau. When asked the question many of you may be wondering—how has this seemingly niched technology managed to become so popular?—Chabot explains that need for data visualization capability is really much more widespread than you might think.

“From the NSA looking at billions of rows of data, to a newspaper journalist trying to write a good story, to non-profits trying to communicate their donations to the community—people struggle with how do I take this data and go serve it up to people in a way that doesn’t take forever, and is actually kind of fun, and gives my audience some beautiful, interactive, informative windows into that useful data?” he explains. “You could do that now by hiring a bunch of software developers. But who’s got that? With unlimited time and budget you could go hire a Flash developer to go build some app for you, but it’s going to take you four weeks and cost you $25,000. Tableau just lets anyone go create useful, interactive data experiences.”

When Chabot first got involved in the technology that Chris Stolte and Pat Hanrahan were exploring at Stanford, he says he saw global opportunity to not only make data easier to … Next Page »

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