It was a fairly quiet week for deals in the Northwest, with some activity in biotech, software, materials, and devices.

—Seattle-based Arzeda, a developer of artificial enzymes, formed a partnership with DuPont to create new crop seeds that incorporate Arzeda’s technology, which should increase the productivity of the plants for food, as Eric reported. Financial terms were not released.

—Arlington, WA-based MicroGreen Polymers raised $1.6 million from WRF Capital and angel investors including Northwest Energy Angels, Alliance of Angels, and Atlas Accelerator, as Luke reported in an exclusive. The company has developed technology to recycle plastics into cheaper and more environmentally friendly coffee cups, food packaging, and other items. The money is part of an ongoing round that MicroGreen expects will net $3 million to $4 million this month.

—In another Xconomy exclusive, we talked with the founder of Santa Clara, CA-based Data Domain (NASDAQ: DDUP), Kai Li, a Princeton University computer science professor who has been visiting the University of Washington for about a year. Data Domain just got bought by Hopkinton, MA-based EMC (NYSE: EMC) for $2.1 billion in cash. Li spoke in depth about the ideas behind Data Domain, its growth and acquisition, and the future of data storage.

—Luke reported that Seattle-based Kineta, a biotech firm with an unusual business model, acquired the licenses to an array of compounds from Redwood City, CA-based Airmid with the goal of reaching clinical trials for drugs to tamp down autoimmune diseases like rheumatoid arthritis and multiple sclerosis. Kineta is looking to run promising drug candidates through early-stage clinical trials and then form partnerships with bigger drugmakers to run bigger trials, collecting upfront payments, milestones, and royalties on any product sales.

—EndoGastric Solutions, a medical device company based in Redmond, WA, and Redwood City, CA, raised $7.5 million from undisclosed investors. The firm, which was originally incubated in Kirkland, WA, at Scout Medical Technologies, makes devices that treat heartburn and obesity. It previously raised $79 million in venture capital from MPM Capital, Advanced Technology Ventures, and other investors.

—Seattle-based Cozi, a startup that makes family organizing and activity planning software, formed a partnership with Nestle to launch its service on the food company’s website, as Eric reported. Cozi’s software will be rebranded on the site with both companies’ names. Financial terms of the deal were not announced.

—Earth Class Mail, a Seattle company that delivers physical mail to businesses digitally, is providing key technology for Kansas City, MO-based Perfect Output’s document management service, as Eric reported. Financial details of the partnership were not given.

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Sometimes (just sometimes) it pays to look behind the jargon in press releases. One glance at yesterday’s coming-out-of-stealth-mode announcement from Boxborough, MA-based Digital Reef, which starts off talking about “massively scalable unstructured data management platforms” and “capabilities [that] improve eDiscovery outcomes,” was enough to make even a nerd like me want to tune out. But it turns out that Digital Reef has built something fairly new and interesting, a “similarity search engine” for big corporate networks that can start with one document—say, a Word or Excel file—and find others that resemble it.

That could be very useful if, for instance, you were a compliance officer at a big health plan and you wanted to see whether any of your employees had unsecured patient records sitting around on their laptop hard drives (which would be a big violation of federal healthcare privacy regulations). Just plop an example of a patient record into the Digital Reef system, and it will scour the network for other examples. Or say you were a lawyer at a big firm writing a brief in an employment case and you wanted to find out whether any of your colleagues working on similar cases in the past had already assembled the relevant citations. You could simply submit your entire draft to Digital Reef, and see what washed up.

The problem with most big organizations, says Brian Giuffrida, Digital Reef’s vice president of marketing and business development, is that they don’t know what they don’t know. A traditional keyword-based search might be effective if you already have a good mental picture of the kinds of information stored on your company network, and if you know what search terms are most likely to ferret out what you need. But if you don’t even know whether the information you’re searching for exists, where do you start?

“A lot of times, larger firms have dedicated knowledge experts to retrieve data…because searching is a cumbersome task that requires knowledge of the corpus and of the structure of the data,” says Giuffrida. “But once you start doing searches by similarity, you no longer need to be an expert in keyword searching or Boolean algebra. You can just say ‘Here’s the presentation we did at the conclusion of this engagement with Company ABC, I’m looking for similar stuff.’ It’s as simple as that.”

Digital Reef’s system, which has been nearly three years in the making, is designed specifically to index and organize the miscellaneous types of documents—Word, PowerPoint, Excel, PDF, e-mail—that clutter the average knowledge worker’s local file system. (Such data is “unstructured,” in computer science lingo, at least when you compare it to the nice rows and columns of information in transactional databases.) Not only are these the kinds of files where most of a company’s collective experience is stored, but they’re piling up faster than any other kind of corporate data, according to Digital Reef’s founder, president, and CEO, Steve Akers.

Enterprise content management systems like EMC’s Documentum offer one way to get a handle on all this information. But in a blog post yesterday, Akers argues that these systems force users to tag and classify documents in a way that’s contrived, error-prone, and poorly adapted to people’s actual work flows. The only way for a company to really find out what kinds of data it has laying around—and thereby what kinds of security, compliance, and litigation risks it might be opening itself up to—is to let that data “speak for itself,” in Akers’ words, through similarity-based search.

Akers is a longtime Boston-area technology entrepreneur who’s done stints at Apollo Computer, Hewlett-Packard, Stratus Computer, and Shiva Corporation. Spring Tide Networks, the Boxborough-based Internet data switch maker Akers co-founded in 1998, was purchased by Lucent in 2000 for a cool $1.5 billion. According to Guiffrida, Akers took several years off after leaving Lucent deal to develop the mathematical modeling techniques behind similarity-based search. He formed Digital Reef in late 2006 with a $10 million investment from Waltham, MA-based Matrix Partners. A second $10 million round, led this time by Boston’s Pilot House Ventures, closed late last year.

Until emerging from stealth mode this week, the company did business under the name Auraria Networks. It has 32 employees, including a handful in Atlanta, GA.

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FirstDocs, a Westwood, MA, startup whose software automates the way law firms and corporate legal departments create, share, store, and retrieve legal documents, disclosed on January 9 that it had garnered an unspecified amount of Series A funding from Boulder, CO-based Foundry Group. Today, Private Equity Hub reports based on regulatory filings that the amount raised was $3 million.

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Waltham, MA-based Charles River Ventures is the lead investor in a $9 million Series B financing round for Scribd, a San Francisco startup and Y Combinator graduate whose “iPaper” document reader allows users to upload documents such as Word, PDF, and PowerPoint files to the Internet and share them by embedding them in Web pages. In its announcement today about the Series B round (which also included Redpoint Ventures and Kinsey Hills Group), Scribd said it has hired former Bebo COO George Consagra as its new president.

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EMC, the software and data-storage giant based in Hopkinton, MA, is announcing today it has formed a new company called Decho. The new organization is composed of two formerly separate EMC businesses—American Fork, UT-based Mozy and Seattle-based Pi. The merged operation will focus on cloud computing services having to do with managing people’s digital information, including the online backup and storage of personal data.

Xconomy is very familiar with EMC (NYSE: EMC) and Mozy. Back in October 2007, we wrote about the story behind EMC’s acquisition of Berkeley Data Systems, which developed Mozy, the online backup service. The Mozy desktop application automatically uploads copies of key files and folders to Mozy’s servers, and is best known for its popularity among consumers rather than companies.

As for Pi, the software startup was acquired by EMC last February, and has always been pretty stealthy about what it’s doing. (Its name stands for “personal information,” not the transcendental number we know from geometry class.) The firm was originally founded by ex-Microsoft exec Paul Maritz, who became CEO of VMware (also part of EMC) in July. Maritz will remain at VMware, and is on the board of Decho. The new company has more than 100 employees based in four cities: Seattle; American Fork, Utah; Montreal, Canada; and Bangalore, India.

Charles Fitzgerald, Decho’s vice president of product management (also an ex-Microsoftie), sat down with Xconomy last week to tell us more about the direction of the company. First of all, its name stands for “digital echo,” referring to the data bouncing around between a user’s devices—phone, laptop, desktop—and the Internet cloud. “If you look at the new Decho entity, we are a cloud-based service provider focused on personal information. We’re beyond the startup stage,” says Fitzgerald. “We have eight figures of revenue now and are growing nicely…The revenue is all coming from Mozy.”

Why focus on personal information management? Fitzgerald cited four catalysts: the sheer volume of data out there (70 percent is from individuals—things like photos and documents); redundant information scattered across many devices; the desire of customers to save data for decades; and the need to categorize and tag our information in an automated way. “Today’s world is very device-centric,” Fitzgerald says. “Instead of a device-centric world. we’d like to have an information-centric world where the core information is something I can act on and protect and manage and enrich very explicitly.”

To that end, Decho will be combining Mozy’s technology—cheap disk storage with advanced software algorithms—with Pi’s …Next Page »

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Over the past couple of weeks, I’ve been exploring the relationship between tech startups in Seattle and investors in the San Francisco Bay Area. We ran a story about what Seattle entrepreneurs can do to attract more attention from Bay Area VCs, and then a follow-up about whether there might be a brain drain of early-stage startups from Seattle heading south in search of funding. The pieces have generated some pretty spirited feedback.

One of the most provocative responses I got was from Shan Sinha, an MIT alum, former Microsoftie, and co-founder of DocVerse, a collaborative-document software firm originally based in the Seattle area. This summer, Sinha and fellow co-founder Alex DeNeui raised $1.3 million from Bay Area investors and relocated their company to San Francisco. Sinha has a very interesting take on Seattle versus San Francisco, for early-stage entrepreneurs. “After reading your article, most of the folks seemed to espouse a viewpoint that there is no advantage to being in the Bay Area and that starting a company and trying to raise money from Seattle is straightforward. There also seems to be a second thread through your anecdotes attempting to espouse that Seattle investors were plentiful and competitive,” he writes. “Our experience did not support either of those observations.”

For balance, I should point out that I recently spoke with data-visualization firm Tableau Software, which moved from the Bay Area to Seattle a few years ago because its founders wanted to live here. So it’s not like there’s an exodus of startups in one direction, or any big trend yet—these are just individual cases. (But I am curious to hear what others have to say, particularly those on the early-stage side of things.)

Sinha wrote, “We moved to the Bay Area for the same reason why people move to Hollywood to make movies. The Bay Area is for startups what Hollywood is for movies. Starting a company is hard enough, not being in the Bay Area is just introducing another hurdle in an already risky endeavor. Why not eliminate as much risk as possible? Any reasoning to justify not being in the Bay Area is a rationalization, in my opinion (often times valid… like “my family is rooted here”… but nonetheless a rationalization that must be overcome).”

He then fleshed out four concrete observations from his experience. The most interesting part to me is his discussion of meeting logistics—trying to build relationships and do deals from afar—as well as the idea that Bay Area VCs move faster and may be more willing to take risks. But I’ll let Sinha speak for himself:

— “Bay Area investors are made of a different ilk than anywhere else. In our experience Bay Area investors just moved at a different velocity. There were some exceptions…we did meet some amazing folks in Seattle …Next Page »

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Iron Mountain, the Boston-based information protection and storage company, said today that it has purchased Denver, CO-based DocuVault for an undisclosed sum. Iron Mountain execs said the acquisition of DocuVault, which specializes in shredding, records storage, and data backup, shores up its presence in the Denver-Colorado Springs area.

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Boston-based information protection and storage company Iron Mountain announced today that Richard Reese, CEO since 1981, will step down in June. Taking Reese’s place will be Bob Brennan, who joined the company in 2004 with Iron Mountain’s acquisition of Connected Corporation and has been its president and chief operating officer since 2005. Under Reese’s leadership, Iron Mountain grew from $3 million in revenue in 1981 to $2.1 billion in annualized revenue last year, and became a leader not just in secure document storage but in electronic records management. Reese will continue as the executive chairman of the company’s board.

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Leonardo da Vinci, the most productive and free-ranging mind of his generation, filled his notebooks using a mirror script that no one else could read. Thomas Jefferson, while serving as Washington’s Secretary of State, invented a wheel-cipher device to protect his diplomatic correspondence from prying eyes. So perhaps it’s not such an unusual irony that the new dean of the Faculty of Arts and Sciences (FAS) at Harvard University—an institution with a deep commitment to freedom of expression—is the inventor of a software technique designed to keep unauthorized people from reading electronic documents.

Liquid Machines, a Waltham, MA, startup founded in 2001 by Harvard’s Michael Smith, showed up on our radar a couple of weeks ago when the company announced a $10 million Series D funding round, led by a New York-based IT venture fund called RRE Ventures. I scored an interview last week with CEO Michael Ruffolo, who explained that the company has raised a total of $37 million in venture backing, has had products on the market since 2005, and has tripled its sales in the last year. And all that progress is founded on a clever idea pioneered by Smith—who is a professor of computer science and electrical engineering at Harvard, in addition to leading FAS—that the company calls “application injection.” The technology takes over word-processing programs, e-mail software, and the like, automatically encrypting digital documents and then decrypting them for authorized users without requiring users to exchange passwords or cryptographic keys or attend to other special chores.

“Our technology and our patents are really around how we’re able to persistently control information across file types and from origination to file-sharing and all the way through to archiving,” explains Ruffolo, who, to illustrate the costs of not controlling sensitive corporate information, cites a recent public-relations debacle at Eli Lilly. An outside lawyer for the pharmaceutical giant inadvertently e-mailed a confidential document about Lilly’s reported $1-billion-plus settlement negotiations with the government over faulty marketing of its antipsychotic drug Zyprexa to a New York Times reporter, who, naturally, published the information—resulting in a huge embarrassment for the company.

“Tens of billions of e-mails are sent each day,” says Ruffolo. “Just ask yourself, how many of those have proprietary information, and how many of those are sent erroneously? You look at that, and you start to say, ‘I need something to control the flow of information that’s leaving my company.’ The most dangerous breach is the one that you’re not aware of.”

I won’t comment on how useful those occasional breaches can be to curious journalists. Instead, I’ll turn back to application injection, which is essentially the process by which Liquid Machines’ main product, called Liquid Machines Document Control, fuses itself into and takes control of virtually any other program that can play or display digital content—such as Microsoft Word and Adobe Acrobat. The “injection” happens at the moment the display program is loaded …Next Page »

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