Three quick items from around the Seattle-area tech scene this week:

—Clearwire (NASDAQ: CLWR) shares have fallen sharply again on word from new CEO Erik Prusch that the Kirkland, WA-based wireless provider could skip an upcoming debt payment. Prusch discussed that possible step in an interview with The Wall Street Journal.

The Associated Press and ZDNet quote separate industry analysts’ reports with somewhat contradicting takes on the news: Optimism that majority shareholder Sprint could kick in much-needed cash, and skepticism that Sprint would pay up unless there’s some sort of restructuring.

The math is pretty clear: At the end of the third quarter, Clearwire had about $700 million in cash and about $4 billion in long-term debt. The $237 million payment in question is due Dec. 1, although there is a 30-day grace period.

—Frank Artale of Ignition Partners led a $15 million investment in ServiceMesh, a provider of cloud-computing platforms for businesses. As VentureBeat reports, Santa Monica, CA-based Service Mesh had been self-funded up until the Ignition-led investment.

It’s one of many cloud-computing investments we’ve seen this year from Artale, who has long experience in the sector as an entrepreneur, executive, and investor. Check out this profile I did in July, just before the flurry of announcements about Artale’s investments started hitting the news.

—Seattle-based startup Zoomingo, a new venture by the co-founders of language learning service Livemocha, raised $1.3 million from Naya Ventures, Benaroya Capital, and angels. Zoomingo is building an application and retailer platform that can deliver advertising and sales to consumers on mobile devices.

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Y Combinator unleashed its latest class of startups on the world yesterday at its summer Demo Day in Mountain View. The famed venture incubator, which provides mentorship, networking, investor access, and a modest cash stipend in return for an equity stake in each company, admitted a record 63 startups this time around. That’s up from 43 in the winter 2011 batch, and 34 in summer 2010.

To accommodate all those entrepreneurs, Y Combinator has had to expand, literally. For the second time, the organization has moved the signature orange wall in its common room about 30 feet to the west, roughly doubling the amount of space for work tables—and for Demo Day seating for investors and journalists, which is always at a premium.

Summaries of the YC startups’ pitches start below, one paragraph each. But fear not—you won’t have to wade through 63 paragraphs. That’s because a record proportion of this year’s startups, 33 out of the 63, asked to stay off the record, meaning they haven’t launched their services or they’re not ready to have it known that they took part in Y Combinator. Also, I just couldn’t get through all 30 summaries last night, so I’m dividing up this debrief into two parts. Today it’s A through Mo; tomorrow, Mu through Z.

I’m trying something new this time around. As in the past, each listing contains a link to the company’s website, the names of its co-founders, the tag line provided by each company (when there is one), and my summary. What’s new is the final line—my quick personal take on each startup. The presentations were admittedly brief (about three minutes each), so I’m not ready to form final judgments about any of these companies. But as they say, first impressions matter.

Aisle50

Chris Steiner, Riley Scott, George Korsnick

“Groupon for groceries.”

The founders of Aisle50 argue that newspaper circulars are losing their effectiveness and that large food manufacturers are looking for new ways to promote their products, including e-mail and the Web. Whereas the incumbent digital coupon provider, Coupons.com, simply reduces an entire circular to a few Web pages, Aisle50 crafts a single, custom page for each promoted product and features one discount per grocery chain at a time. When a member buys the currently featured product via credit card at the Aisle50 website, a matching credit is applied to his or her store loyalty card. The startup is currently working only with the Lowes Food chain in North Carolina, but will soon add hypermarket chain Meijer. A “giant pot of money” is waiting to migrate from paper coupons to digital platforms, the startups says, and it wants to become “the premier way for food manufacturers to market their product.”

My take: Reminiscent of YC S10 startup Anyleaf, which is also out to kill the supermarket circular, but Aisle50 has the Groupon twist. Y Combinator seems to return to certain themes again and again, as if searching for the right solution.

Bushido

Sean Grove, Kevin Zettler

“An app store for the cloud.”

To get their Web or mobile apps distributed, developers have to worry about lots of things outside their areas of specialty, such as hosting, authentication, and billing. Bushido says it can take an app written using the Rails programming framework and “wrap” it in a software package that takes care all of that, liberating developers to focus on their software. Over time, the startup says it will accumulate “all the apps, all the users, and all the data,” giving it an understanding of a “data graph” that will be as powerful as Facebook’s social graph.

My take: Probably the brashest and most cryptic pitch of the day. The company clearly hopes to bask in the glow of Heroku, the Ruby on Rails hosting service that was part of Y Combinator’s Winter 2008 term.

Can’tWait

Eric Florenzano, Eric Maguire

If the names Eric Florenzano and Eric Maguire sound familiar, it’s because these are the same two Erics who worked with Leah Culver to launch Convore, a YC W11 company that specializes in IRC-style group chat. That probably makes them the first startup founders to participate in two consecutive terms at Y Combinator. This time around, they’re going after the movie business—specifically, trailers. The startup’s iPhone app (coming soon to Android) lets users browse and watch movie trailers, share their favorites with friends, and set reminders so they won’t miss out when the movies hit theaters. Florenzano calls it “the best marketing platform Hollywood could hope for” and predicts studios will pay the startup handsomely to feature their trailers. In the future, the company plans to take on video games, consumer electronics, and other product categories where pre-orders are prevalent.

My take: It will be interesting to see what company Florenzano and Maguire start for YC W12.

… Next Page »

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I don’t know how most Americans feel these days, but I haven’t felt like this since just before Richard Nixon left office in 1974. Our political leaders (think “jumbo shrimp” or “military intelligence”) have just completed a grand game of chicken. They ended up in just the same position Neville Chamberlain was when he negotiated with Adolf Hitler.

I won’t dwell on the inanity of the negotiations or final resolution about spending, revenues and debt limits. Suffice it to say that cutting a little over $2 trillion from the projected 10—year deficit is akin to losing 7 pounds off a starting weight of 350. We will still have accumulated deficits over that time frame of $7 trillion, and we still confront total debt and vested liabilities of perhaps $90 trillion.

One side argues that we can’t raise revenues and the other argues that we can’t cut entitlements. I have no horse in the race, so to speak, so let me be clear: both sides are wrong, dumber than a pile of rocks, but much more dangerous. Entitlement costs, especially healthcare, will eat us alive: without real reform of affordable health delivery, not just reform of access to health insurance, the U.S. economy is doomed. More generally, at all levels, government has given away the future in order to buy votes in the present. It has been a truly bipartisan effort over decades. On the revenue side, we will need to increase taxes, broaden the tax base, and reform the tax code, or we are also doomed.

Because the negotiated settlement of the debt crisis was so lame, a ratings agency has downgraded the country. Instead of asking whether we are indeed in greater danger of long-term financial difficulties, everyone is blaming the bearer of bad news, pointing out that they weren’t exactly prescient in the recent financial crisis. Of course that is true but irrelevant. You don’t need a crystal ball to see that we have an unsustainable business model and no political process for change.

Reading the papers these days is remarkably uninformative. Increasingly, the media mixes editorial and news content. Each outlet picks a side and then puts all its weight behind a particular narrative. Silver-tongued/penned commentators rail against the lunacy of the other side without the slightest sense of humility or responsibility. Meanwhile, the American public divides into equally ill-informed and unthinking partisan camps.

Whenever I see this recurrent set of facts play out, I am reminded of one of the Dr. Seuss books (The Sneetches) in which one group has a star on their bellies and purports to be superior to the non-starred crowd. The latter gets an enterprising entrepreneur to put stars on, which causes the previously starred group to hire the same entrepreneur to remove their stars. In the end, of course, … Next Page »

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San Francisco-based ReadyForZero, a Y Combinator alumni company that helps credit card holders reduce their debt, said in a blog post today that it has obtained $4.5 million in Series A venture funding. Polaris Venture Partners and Citi Ventures led the round. “Now with more capital resources we can take everything we’ve done so far to the next level…[including] hiring top talent, addressing all your open issues and feature requests (a long and growing list!), and expanding our office,” the company stated. Xconomy profiled ReadyForZero in February.

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Washington state companies collected about $53 million in equity financing from venture capitalists and angels in March, led by an $11 million VC round for Vancouver, WA-based semiconductor laser manufacturer nLight Photonics, according to data compiled by research firm CB Insights.

nLight still had another $4 million left to sell from the offering, according to last month’s SEC filing. The investors in nLight’s March financing round weren’t disclosed, but the company website lists Mohr Davidow Ventures, Oak Investment Partners, Menlo Ventures and Adams Capital Management as its backers. nLight has been around since 2000 and has manufacturing facilities in Hillsboro, OR, Finland, and China. Along with lasers, the company also supplies optical fiber products.

The second-largest investment in March went to Tier 3, the Seattle-based cloud-computing provider. It was the company’s first publicly announced investment round, with Ignition Capital and Madrona Venture Group supplying the money. Microsoft is among nearly 100 customers for the expanding company, which was founded in 2006.

Coming in third for large equity investments was $6.9 million for Physware, a Bellevue, WA-based provider of software for designing the circuitry in computer systems and other electronics. The company was founded by Vikram Jandhyala, an electrical engineering professor at the University of Washington. Physware also has an office in Mountain View, CA. Investors were not disclosed.

Another Bellevue company, Visible Technologies, was among the top investment hauls for March with a $6 million infusion from Investor Growth Capital, Centurion Holdings, Ignition Partners, WPP Group, and In-Q-Tel, according to CB Insights’ data. Visible provides social media monitoring for businesses—a growing field that helps companies sort out what customers are saying about them online. Visible has offices in Seattle, London and New York, and relationships with companies like Microsoft, Xerox, and Boost Mobile.

Rounding out the top five equity investments was Powerit Solutions, a cleantech company that provides energy management and conservation for industry clients, which landed a $5 million investment led by Black Coral Capital. Powerit’s Seattle branch is part of a larger company, which includes an office in Sweden. Powerit also announced last month a new CEO for its North America and Northern Europe divisions— Matthew Schiltz, formerly of Seattle-based DocuSign.

You can check out the rest of the March financing data here, including several more deals less than $5 million and one debt financing.

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Sunnyvale, CA-based Calisolar, which has developed a low-cost way of purifying silicon for use in solar cells, continues to raise cash. This week it collected an additional $8 million in an offering of debt, options, and securities, according to a regulatory filing. Calisolar raised $3 million in a similar offering in December and $15 million a few months before that. Good Energies, Ventures West, and Yaletown Venture Partners, and other investors took part in a $20 million equity round in February 2010.

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Y Combinator founder Paul Graham likes to advise entrepreneurs taking part in his startup incubator program to focus on “hair-on-fire” problems—areas where new ideas can take hold faster because people are in urgent need of a solution. In the consumer market, there couldn’t be a much bigger hair-on-fire problem than credit card debt. Households with cards carried an average credit card debt of $15,788 in 2008, according to the most current data available from the Federal Reserve Bank of Boston’s Consumer Payment Research Center. And that debt was mounting at an average annual percentage rate of 14.48 percent, triple the rate of the average mortgage loan.

Young people—no surprise here—are especially bad at managing their cards: 41 percent of adults aged 18 to 29 admitted that they’d made only the minimum payment on a credit card at least once in 2009, according to a survey by the Financial Industry Regulatory Authority. Many don’t understand that if they only pay the minimum amount each month, they’ll waste more on interest and drastically delay the day when they’ll be debt-free.

Non-profit agencies like American Consumer Credit Counseling have long offered credit-card holders advice on debt management, and some even help consumers consolidate high-interest credit debt into lower-interest loans. But signing up for this kind of help is a slow, manual process involving lots of phone calls and paperwork. Rod Ebrahimi and Ignacio Thayer, who took part in the summer 2010 term at Y Combinator, say they wanted to try using the latest Web technologies to automate and speed up the credit management process. And the startup they created to do that—ReadyForZero—is taking the wraps off its free online advisory service today, after a long period of private beta testing.

At ReadyForZero, users simply input their name and address, the last four digits of their social security numbers, and login credentials for their online banking and credit card accounts. Then the startup’s algorithms go to work, pulling in information about debt levels and payment schedules and generating a personalized dashboard that graphically summarizes a user’s debt and his progress paying it off over time.

It’s all designed to equip users to take smart action—for example, by paying off their highest-rate cards first, or perhaps by applying online for a lower-interest personal loan. There’s a Mint-like focus on colorful graphics that help users understand their financial situation, but with a specific lens on resolving credit card debt.

Ebrahimi and Thayer are both programmers by training, but Ebrahimi says they decided to dig into consumer debt management after watching their own friends struggle to pay off credit cards.

“In one week I got two e-mails from totally different parts of my life,” Ebrahimi says. “One was from a guy who was asking 12 of his close friends to pitch in and purchase his credit card debt so that he could pay a lower interest rate. That was light bulb number one. Light bulb number two was … Next Page »

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PlayFirst, the San Francisco-based maker of popular iPhone, iPad, and Facebook games such as Diner Dash and Chocolatier, said Tuesday that it has raised $9.2 million in venture and debt financing. Mayfield Fund, Trinity Partners, DCM, and Rustic Canyon Ventures provided a $5.2 million venture infusion, while Comerica Bank provided a $4 million loan. Playfirst president and CEO Mari Baker said in a statement that the company plans to use the funds to expand into the burgeoning social and mobile gaming markets and to “aggressively optimize the PlayFirst brands that consumers love.”

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GreenVolts, a Fremont, CA, startup developing high-end photovoltaic panels for utilities that include sunlight-concentrating optics, has raised $7.5 million in debt financing, and could eventually borrow as much as $11.25 million, according to a regulatory filing this week. Oak Investment Partners in Westport, CT, put $30 million into GreenVolts in a 2008 Series B round.

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Convoke Systems of San Francisco said today that it has closed a $5.5 million Series B venture financing round led by Boston-based Flybridge Capital Partners and boutique investment firm QED Investors. Convoke makes an online system that simplifies the process of registering and tracking consumer and commercial debt as it is sold, repackaged, and resold. Flybridge partners Jeff Bussgang and Matthew Witheiler have joined Convoke’s board, as has QED partner and former Capital One executive Frank Rotman. The company said it will use the financing “to fund new product development, sales and marketing, and market expansion.”

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Andy Sack has been working behind the scenes for more than a year. Yes, we know he’s been busy bringing the first session of TechStars, the startup bootcamp, to Seattle this fall. He’s also been co-leading Founder’s Co-op, the seed-stage investment fund, for the past couple of years. But just when you think the Seattle tech entrepreneur and angel investor has his hands full, he busts out with a new venture. This one could have even greater implications for startups, entrepreneurs, and innovation—and not just in Seattle.

It’s called RevenueLoan, and Sack is the founder and CEO of this new company. Its goal is to provide capital for promising startups in the Pacific Northwest, and across the country, using a different kind of investment model called “revenue-based financing” (sometimes called “royalty-based financing”). Before we get into exactly what that means, here are the hard facts. RevenueLoan has raised $6 million from Seattle-based firms Voyager Capital, Summit Capital, and Founder’s Co-op, to make investments and support operations. Sack says he will remain a partner with Founder’s Co-op, but will step away from co-leading that fund to focus on RevenueLoan and TechStars. (Founder’s Co-op will be led by Chris DeVore and Geoff Entress.)

The idea of RevenueLoan is to make investments in the range of $100,000 to $500,000, Sack says, targeting companies that already have between $500,000 and $5 million in annual revenue. Instead of taking an equity stake in the company like a traditional VC firm would, RevenueLoan will receive a percentage of future revenues (typically 1 to 10 percent). The investor can generate a maximum of a 3-to-5 fold return on his investment. That’s the “revenue-based” part of the equation, and the goal is to open up a wider range of companies to invest in, where the investment returns will flow if the company is able to execute on its business plan. Such an investment model doesn’t depend on a company going public or getting acquired, like traditional venture capital.

Since the IPO market has been in a drought for years, and acquirers in such an environment can afford to drive a hard bargain, this revenue-based model definitely has appeal. After all, early-stage investors are starving for some way to generate returns. And for entrepreneurs, it can offer a new way to get the capital they need for expansion, while allowing them to spend more energy executing on their business plan rather than chasing the all-important “exit” that VCs crave.

“We’re going after a segment that is today underserved by traditional equity like VCs and banks,” Sack says. “It’s a huge market.”

Revenue-based finance is not a new idea. As I first described in a feature last October, the model dates back to traditional mining companies and government economic development programs. Since the early 1990s, it has been applied to early-stage technology startups by a handful of … Next Page »

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When it came to startup investing in the Northwest last month, it was a bit of a give and take. Washington-based companies raised about $21 million across three deals, each worth more than $1 million, plummeting from the $53.5 million that companies pulled in across 10 such transactions in February.

But the number of “under-the-radar” deals—what we call startup financings worth less than $1 million—more than doubled from February to March. We tracked 11 transactions under $1 million for the region last month, a jump from the five under-the-radar deals that area startups inked in February. The stats are courtesy of our partner CB Insights, a New York-based private company intelligence platform.

The trend was not unique to the Northwest. Across the country, the list of smaller deals trumped their larger counterparts. The New England under-the-radar funding list for March was the longest we had seen all year, while Massachusetts companies pulled in the smallest amount of funding this year in the monthly list of bigger venture deals we reported on.

In March, 10 Northwest under-the-radar financings went to companies in Washington, while one Portland, OR-based company nabbed some funding ($500,000 in equity for wind turbine maker Skyron Systems). Of the 11-transaction list, six deals were in equity and five were based in debt. The top deal was a $853,288 offering of equity, options, and warrants that went to Moseo, a Kirkland, WA-based company behind the website SeniorHomes.com, an online directory of elderly care information (which just changed its name last week).

There are a few companies that, while not at the top of the list, are worth noting. We might not have included Mad Fiber, a Seattle-based maker of carbon bicycle wheels—except for the fact that it is working out of a former bakery, and using the ovens and freezers that previously played a role in constructing dough and pastries as part of its manufacturing process. (Now that’s innovation you can’t ignore.) HomePipe Networks, a Seattle company that pulled in $215,000 in debt-based funding, also struck my interest. It is making networking software that enables you to access content on your home computer anywhere, using your mobile phone. And there’s Fridge Door, a Seattle Web startup that’s too stealthy for a website at this point, but has what I think is a cool name.

We saw a few names on the March under-the-radar list that are familiar to us. We wrote about online travel site Yapta when it raised a $2 million Series B round last June. In February, the Seattle-based company announced Kayak.com would be powering the flight search engine component of its website. Yapta showed up on our under-the-radar list with a $300,000 mixed offering of debt, options, and warrants. Also, Iverson Genetic Diagnostics reprised its spot on the under-the-radar list, with a $110,000 transaction of debt, options, and warrants in March. (The Bothell, WA-based company also made it on the February list with $341,000 in equity-based funding.)

Check out the full list of under-the-radar transactions below:

*includes options or warrants

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Mascoma, the Lebanon, NH-based developer of advanced methods for making ethanol from wood fiber and other non-edible plant matter, has raised $3.4 million toward a $10 million round of convertible debt financing, according to regulatory documents filed April 21. The funding presumably puts the company in stronger position to move forward with construction of an ethanol plant in Michigan’s Upper Peninsula.

The filing indicates that Mascoma raised the new funds from a group of 10 separate investors, but it doesn’t identify them. The company’s past venture and strategic investors, who have ponied up at least $100 million in three previous rounds of funding, include Atlas Venture, Flagship Ventures, General Catalyst Partners, Khosla Ventures, Kleiner Perkins Caufield & Byers, General Motors, Marathon Oil Co., Pinnacle Financial Partners, and Vantage Point Venture Partners.

Mascoma won a $15 million grant from the Michigan Economic Development Corporation in June 2008 to build a cellulosic ethanol plant in Kinross in Chippewa County, south of Sault Ste. Marie, MI. The state later pledged another $8.5 million for the plant, which is a joint venture with Marquette, MI-based forestry company J.M. Longyear and is expected to create 50 to 75 jobs and be operational by 2012.

Mascoma representatives did not immediately respond to Xconomy’s request for comment on the funding round. Mascoma appointed a new CEO, chemical industry veteran William Brady, in January.

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As you may have noticed, we here at Xconomy look at startups’ financing as signs of what companies or industries are making a big impact on innovation in the region. Just last week we reported on the major equity investments in Northwest startups in December, tracked by our partner ChubbyBrain, a New York-based information services company tracking VC, angel, and other investments in private companies.

But there’s another subset of startup financings that didn’t make it into that list and are often too small to show up in the breaking news stories on venture funding we typically cover. They’re the under-the-radar deals, which range from $100,000 to $1 million and can include both equity and debt forms of funding.

In December, the Northwest pulled in 11 of these smaller deals, with six that included equity financing and five based in debt. All but one deal went to companies based in Washington, the exception being the $310,000 in debt financing raised by Portland, OR-based CafeGive, a shopping website that allows nonprofits to reap a percentage of online purchases.

While you most likely won’t see us reporting these types of deals right as companies announce them or file with the SEC, we look at the money as valuable sources of insight. Often they signal which new companies are gaining ground, or which industries and sectors angel investors are particularly fond of putting their cash into.

Here’s an example. ChubbyBrain noted the $1 million that Visible Technologies took home in debt-related funding in December, but that was only the beginning. The Bellevue, WA-based company, whose software aims to help companies track social media conversations about their brands, announced in January that they had raised a total of $22 million in Series C funding, a move we covered earlier this month.

As another signal of momentum, one company looks like it has raised more than originally expected. Billing software provider Nirvaha raised $225,000 of a $500,000 equity round, as tracked by ChubbyBrain. But the Seattle company amended its SEC filing earlier this month to show it had raised $570,000 and is targeting $650,000.

Some of the companies on the under-the-radar list are very familiar to us. ChubbyBrain tracked $600,000 that Seattle-based Zulily raised as part of a $4.6 million Series A round, which we reported when the online retailer announced it in December. (The company has officially launched its private-sale site today.)

Last March, we wrote about Bellevue, WA-based Blade Games World when it pulled in $4 million in a first round of venture funding. The electronic games animation company raised another $500,000 in debt financing in December.

Healthcare-IT companies took home a good chunk of the December startup deals in the Northwest. They include an online social media site for doctors, iMedExchange, as well as a medical practice data tracker, Clario Medical Imaging, and electronic medical records company Design Clinicals. Other Internet companies, including a few shopping websites, were also prominent on the list.

See the table below for the full breakdown of under-the-radar debt and equity financing in the Northwest in December:

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Derry, NH-based Cedar Point Communications has raised $2 million out of a planned $3.4 million round of debt, the company revealed in regulatory documents filed November 24. The company, which makes voice-over-Internet-Protocol switching hardware used by cable and telephone operators, has raised $70 million in venture funding to date from Ascent Venture Partners, Battery Ventures, Charles River Ventures, Comcast Interactive Capital, Focus Ventures, JP Morgan Chase, Star Ventures, and Motorola, according to its website.

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Jackpot Rewards, a Newton, MA-based startup that runs cash-back rewards programs and sweepstakes for online shoppers, has raised just over $12 million in new financing in the form of convertible debt, according to regulatory documents filed today. We profiled the company in February 2008, when it first announced its plans to give away a $1 million jackpot every week; the company generated controversy later that spring by making the prizes much more difficult to win, a decision explained by CEO Jim Miller as part of a shift to an emphasis on the company’s cash-back rewards program. According to today’s filing, $250,000 of the debt-based financing will be paid to executives or directors of the company. Jackpot Rewards has raised at least $16 million in equity financing from a group of individual investors including former Fidelity Magellan fund manager Peter Lynch.

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Venture financing perked up last month, at least for a handful of Seattle-area startups and young companies. VCs and corporate investors poured $76.9 million into five Washington-based companies in September, according to data provided to Xconomy by ChubbyBrain, a New York-based information services company that develops tools for investors, startups, and entrepreneurs. There were also two debt financings worth a total of $8 million.

The total funding of Washington companies, $84.9 million, is up from $51.4 million in the previous month (and that figure included a couple of companies whose headquarters are out of state). But the September increase is largely due to one especially big transaction.

The largest deal by far was Seattle-based Calypso Medical’s $50 million Series E financing, led by Skyline Ventures and Frazier Healthcare Ventures. It’s the biggest venture deal in the Northwest so far this year, and you can read about the story behind the financing here—Calypso has overcome some challenges in the past year. The company makes a medical device that pinpoints radiation in ways that are supposed to help minimize the side effects of prostate cancer treatment.

The September deals were concentrated in medical devices and healthcare, with a few smaller deals in software and tech. The biggest financing in software was Bellevue-based VoiceBox Technologies, which raised about $13 million from corporate investors in Asia, including AutoNavi, Inventec, MiTAC, and the Morningside investment fund. But that money was raised over the course of the past year, with the company officially announcing it in September after a regulatory filing let the cat out of the bag. VoiceBox makes speech recognition systems for cars and mobile applications.

The venture deals (see Table below) were spread evenly among early, mid, and late-stage financings. The only Series A deal was Seattle-based Integrative Diagnostics, which raised $7.5 million for early cancer detection. The company was founded by biotech pioneer Leroy Hood.

In addition to the venture deals, Redmond-based Spiration (which makes a medical device for treating lung diseases) raised $7 million, and Kirkland-based SchemaLogic (which makes software to manage metadata) raised $1 million in a pair of debt financings.

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Where I grew up in the Midwest in the 1970s and early 80s, Cray was synonymous with supercomputing. Back then, a supercomputer was a top-flight machine that could perform a few hundred million floating point operations per second (“flops”). That was good enough to help scientists do intensive calculations in areas like weather forecasting, climate modeling, and nuclear weapons simulations. Cray’s first supercomputer, the famed Cray-1, was bought by Los Alamos National Laboratory for $8.8 million in 1976; eventually, some 80 of the machines were sold, for $5 million to $8 million a pop.

Today, your average desktop computer is far more powerful than a Cray-1, and so the definition of “supercomputer” keeps changing to keep up with the times. But one thing has not changed. Cray (NASDAQ: CRAY) is still a major player in the space, despite a long history of ups and downs. The company, which began in 1972 as Cray Research in Chippewa Falls, WI, was bought by Silicon Graphics in 1996 for $767 million, and then was reborn in Seattle in 2000 following a $50 million merger with Tera Computer (which was renamed Cray). Since then, it has been a long uphill climb to get back near the top of the supercomputing heap against heavyweight competitors like IBM and Hewlett-Packard.

Nobody better to tell that story than Peter Ungaro, the chief executive of Cray. I recently had a chance to speak with Ungaro by phone at his Spokane, WA, office about his company’s strategy and recent history, the technical challenges involved in modern supercomputing, and innovative ways of gaining new customers (how do you sell someone a $10 million machine?). What impressed me was his ability to lay out the financial concerns of his company while also diving deep into the technological aspects of supercomputers—how they will interact with cloud computing, how computational records will continue to be broken, and when computers might exceed all processing capabilities of the human brain.

First off, I wanted to know how Ungaro (left) defines a “supercomputer” these days. Some would say it should be one of the 500 fastest machines in the world. Others would say it’s a machine used for scientific and technical problems that costs more than a certain amount. Ungaro’s definition is simple and focuses on the bottom line. “We like to think of supercomputers as costing more than a million dollars,” he says.

Ungaro, a Washington State University alum, joined Cray in 2003 to run sales and marketing as senior vice president. He had been at IBM for 13 years, most recently running its high performance computing group, a $2 billion business inside Big Blue. Why did he make the jump to Cray? “I really loved the supercomputing space,” Ungaro says. “Customers are doing really interesting things. I really wanted to try and see what a smaller company was like. Even at $2 billion, you’re only 2 percent of IBM’s revenues.” In short, like many entrepreneurs, he wanted to have more impact. “There was no better place to go than Cray. It was a natural move.”

But Cray had its share of problems. The company had struggled to get its next-generation supercomputer product ready, and 2004 was “really rough,” Ungaro says. Cray was losing money and … Next Page »

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In a tender offer registered today with the Securities and Exchange Commission, Waltham, MA-based network software maker Novell said it will buy back up to $121.6 million in convertible debt notes from the debt holders. The one-for-one offer, which commences June 15 and expires July 14, covers 0.50 percent convertible senior debentures due in 2024, the company said in an announcement.

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Deals in the Northwest have slowed down a bit in the past week. But there were some new partnerships formed, as well as a trickle of funding deals, in software, entertainment, cleantech, and biotech (the biggest deal came this morning).

—Seattle-based NanoString Technologies raised $30 million in a third-round venture financing led by new investor Clarus Ventures, as Luke reported this morning. Existing investors OVP Venture Partners and Draper Fisher Jurvetson also participated. NanoString, founded in 2004, makes advanced genetic analysis tools.

—Eric reported that Seattle-based MOD Systems, a digital media delivery startup, signed deals with Universal Music Group, Sony Music Entertainment, Warner Music Group, and EMI Music, along with other independent labels, to sell music and movies to customers in retail stores, free of digital rights management. Financial terms of the partnerships were not disclosed.

—Luke reported that Bothell, WA-based Alder Biopharmaceuticals broadened its four-year-old partnership with Schering-Plough, the Kenilworth, NJ-based drug giant. The deal is for Alder to develop new targeted therapies against an undisclosed target on cells associated with a common (but unnamed) neurological disease. Financial details weren’t given, but the deal provides upfront cash, milestone payments, and royalties on sales if Alder’s technology leads to an approved product for Schering-Plough.

—Bellevue, WA-based Coinstar (NASDAQ: CSTR), the coin counting and prepaid services company, formed a partnership with gaming companies WildTangent, Spare Change, Rixty, and Aeria Games, to sell prepaid online gaming cards at 500 Cumberland Farms retail locations this summer. Terms of the partnerships were not given. Coinstar’s digital entertainment products will also include prepaid cards for Facebook and MySpace applications.

—Portland, OR-based SplashCast, a startup focused on social TV, is looking to get acquired. I got the story from CEO Michael Berkley, who said SplashCast has had difficulty raising a … Next Page »

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