Billionaires in space! This week started out with a big announcement from Microsoft co-founder Paul Allen, who is bankrolling a new company that aims to make private spaceflight more routine by launching rockets from the belly of an airplane—the biggest one ever built.

Allen said it’ll probably cost him 10 times the nearly $30 million he spent on a previous space project, the SpaceShipOne craft. He’s enlisted some big names for the company—known as Stratolaunch—including aerospace guru Burt Rutan and PayPal founder Elon Musk, who happens to own a rocket company. A former NASA administrator, Mike Griffin, is a Stratolaunch board member.

Also at the announcement (just to watch) was Allen pal and former Microsoft software chief Charles Simonyi, the only private citizen to fly to space twice (he paid his own way with the Russians). Simonyi said he thought Allen’s project was audacious and doable, and said he’d return to the great beyond a third time aboard a Stratolaunch craft—provided his wife approves, and the price is right.

Also making headlines this week around the Seattle area:

—AT&T, Deutsche Telekom, and the U.S. Justice Department postponed the antitrust lawsuit over AT&T’s desire to buy Bellevue, WA-based T-Mobile USA. This followed AT&T and Deutsche Telekom (the parent company of T-Mobile) pulling their merger application from the FCC, and signals the possibility of a different deal in an effort to please regulators.

—Clearwire netted about $715 million in a stock sale, money that was sorely needed for the Bellevue-based wireless supplier to upgrade its fourth-generation network to the faster long-term evolution, or LTE, technology that is becoming the industry standard. Majority shareholder Sprint (NYSE: S) ponied up about a little less than half the money.

—I took a look behind the scenes of Zillow‘s new app for the Kindle Fire, Amazon’s bargain-priced tablet. Zillow (NASDAQ: Z) made a big deal out of being the only real estate app with maps on the Kindle Fire, and for good reason: There’s a bit of a workaround involved because … Next Page »

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When Paul Allen and company discussed their vision for a new kind of private space launch on Tuesday, they made a few nods to an audience member who knows something about the subject: Former Microsoft chief software architect Charles Simonyi, the only private citizen to fly in space twice.

While Allen said that he’s planning to wait some time before journeying beyond Earth himself—even on one of his own Stratolaunch vehicles—Simonyi said he’s actually lobbied the Microsoft co-founder to take the leap.

“I’m urging him to take weightless flights,” through parabolic airplane trips that allow passengers to briefly experience zero-gravity. “Do it step by step, that’s how I did it.”

Seats on a spaceflight when Simonyi went were being quoted in the neighborhood of $25 million-$35 million, but the cost now has risen to above $60 million. Asked if he’d fly on a launch from Allen’s new company once it gets up to speed with possible human crews, Simonyi said he’d be game “if my wife agrees and if the price is right.”

“I think it’s very audacious. I think it’s doable,” Simonyi said of Allen’s project. “The people are all within their sphere of competence, and integrating it together, I think, will be a successful project.”

“It’s a whole different (thing) than what I’ve been flying on, which was a legacy vehicle that had practically 50 years of history. It was a second-generation for the soviets, the Soyuz,” he said. “So this is much more advanced, and the training requirements will be minimal compared to the training that I had to go through.”

So, of course it has to be asked: What’s it like to be in space? “It’s an amazing thing,” Simonyi said.

“What was it the first time that one flew on an aircraft, and looking at the fields and the houses and the city from the air? It’s a whole different experience. And space is not unlike that. It’s just that it’s like a super wide-angle lens, and you see so much.

“Things change very fast. Daytime is only 45 minutes, and then you see a fantastic sunrise or sunset, which itself plays out 16 times faster than on Earth because you are doing 16 orbits a day.

“You know, one minute you are over Australia and 15 minutes later you are on the West Coast. You make radio contact from amateur radio, and soon you are talking to somebody—first you are talking to Seattle, and when you finish the conversation, you are in Florida. It’s just amazing.”

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Stephen Wolfram is not one to be summed up in a few pithy quotes. Well, too bad.

Here is his life in a nutshell:

“I grew up in England and went to all sorts of good schools that I thought were completely irrelevant.”

“By the time I was 20 years old, I was a physics faculty member at Caltech, and I was building a big software system that was a forerunner of Mathematica.”

“Along the way, I learned a lot about what not to do in starting a company.”

“For about a decade I was almost a complete recluse, running the company from a distance, and spending every night working on basic science.”

“I don’t really have a boss. I just do what I want to do. The trick is not to have a private company that gets too weird and too pathological.”

That was a sampling of what the distinguished and controversial Wolfram had to say at our Xconomy Forum in Boston last week, called “6×6: Six Cities, Six Big Tech Ideas.” For those who don’t know, he is the founder and CEO of Wolfram Research, the creator of Mathematica and Wolfram Alpha, and the author of A New Kind of Science. He is also a recently minted Xconomist.

Wolfram, 52, set the table for the theme of our event, which involved some of the biggest ideas in technology and business from entrepreneurs and executives around the country. As only he could, the physics and software guru reflected on his 30 years in the tech industry and his contrarian approach to running big projects and building companies.

A few things really stood out to me in his talk. One was the importance of making mistakes early in his career. While at Caltech in the early ‘80s, Wolfram got into a “grisly early-IP-meets-university” battle over his software tools, he said.

“I ended up deciding I had to start a company around the software system I’d built, and of course I was just a physics kid. I didn’t know anything about starting companies,” he said. “I made lots of mistakes, like not running the company myself, hiring a CEO who was twice my age, and so on. The company quickly started doing things that I thought were silly and boring. In the end, after many trials and tribulations, it did in fact survive and finally went public and was gobbled up by bigger fishes.” (You can read more about his first startup, Computer Mathematics, which was venture-backed and later merged with Inference, here.)

Another thing Wolfram figured out early on was that university work was not for him. After spending time at Caltech and the Institute for Advanced Study in Princeton, NJ, he started a research center at the University of Illinois at Urbana-Champaign to study complex systems and complexity theory. “My plan A was to get lots of other people to help work” on the implications and applications of his findings, he said. “It was OK, but it was really slow. I got kind of frustrated and needed a plan B,” he said. “My plan B was to build … Next Page »

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Take a guess who made the following statement:

“I think the biggest innovations of the 21st century will be at the intersection of biology and technology. A new era is beginning.”

A. Bill Gates

B. Steve Jobs

C. Paul Allen

The comment has gotten little attention in the last few weeks, but it jumped off the page at me toward the end of Walter Isaacson’s revealing new biography of Steve Jobs. The Apple co-founder never had much to say about biology while he was alive, but the opportunities started to dawn on him as he was dying of pancreatic cancer, Isaacson wrote. One of the silver linings of his illness, Jobs said, was how it sparked a passion in his son Reed, a college undergraduate, to learn about genomics at a time that reminded the elder Jobs of personal computing in the 1970s.

While Jobs’s star is burning so brightly in the aftermath of his death, that same statement could easily have been made by tech mogul contemporaries like Gates and Allen. Gates is devoting his fortune to developing technologies that can fight illness in the developing world. Allen has bankrolled an open-source project that enables neuroscientists to access 3-D functional maps of the human and mouse brain. I don’t think it’s an accident that all of these people, so famous for their technology visions, have turned so much of their attention toward biology in recent years.

While much has been made of Jobs’s ill-advised decision to delay surgical removal of his tumor, fewer people seem to have noticed that he had this biotech epiphany toward his end. He had the genome of his tumor completely sequenced, so his doctors at Stanford University could tailor treatments most likely to work against the molecular pathways particularly active in his cancer. Essentially, he flipped all the way from Western medical skeptic to personalized medicine fan in a couple years. It’s a part of the Jobs story that could end up being a significant part of his legacy.

I’m also hopeful that since millions of people are reading this book, it will help rekindle some of the public imagination for biotech.

Don’t get me wrong, I’m not saying let’s bring back irrational exuberance. I’ve written a lot here in these pages this year about the problems biotech is facing—lack of investment, lack of stable business models, lack of jobs, regulatory challenges, overpriced cancer drugs, Big Pharma R&D cuts. It’s all quite depressing. For the most part, the industry is plagued by a crisis of confidence.

This crisis of confidence is the part that puzzles me … Next Page »

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I recently organized a MOHAI walking tour of South Lake Union to begin to explore the roots of the museum’s new neighborhood. My original intent was to explain the importance of South Lake Union as a biotech hub but a different theme emerged in the course of my research. It is true that Seattle has some success attracting biotech organizations to the city, and the prospects for our region are promising, but not stellar. Where our city, and the South Lake Union neighborhood in particular are “punching above our weight” is in our contribution to global health.

The most important asset for the city has been the University of Washington, which generates the intellectual feedstock that might foster either biotech or global health. Beginning in the 1960s, the school transformed itself from general education university to a formidable research institution. While the conventional wisdom is that Warren Magnuson funneled money to the school when he was head of the Senate appropriations committee, Lee Huntsman makes the distinction that Magnuson championed the growth in the National Institutes of Health and then informed the UW of what they had to do to compete for those funds. Needless to say, they learned to compete very effectively. UW is consistently among the top recipients of NIH funding.

The relative significance of global health may say more about our culture than our competence. While the UW is adept at winning grant money, it is less well known for launching companies. The saying is that “if you work at Stanford and get an idea, you call a VC. If you work at UW, you write a paper.”

Still, biotech is an attractive economic engine and the idea that biotech should congregate in South Lake Union goes back as far as 1985, according to The Seattle Times. But there is no evidence that when the Fred Hutchinson Cancer Research Center (the Hutch) moved to Fairview Avenue in 1994 they were influenced by the potential for the neighborhood. Most important to them was finding a site that was large enough and inexpensive enough to bring together their research groups. Likewise, when ZymoGenetics moved to the city’s former Steam Plant that same year (the “mother of all fixer-uppers”) it was for flexible space at a low price.

But by the time of the debate over the Commons project in 1995, Paul Allen envisioned the park surrounded by a collection of high-tech and biotech companies. After the failure of two referenda, Allen’s Vulcan Inc. redoubled its efforts to attract biotech facilities and it seemed logical to funnel software profits into the next big knowledge industry. It wasn’t until 2002 that the movement of Merck’s Rosetta Inpharmatics to Terry Avenue provided some validation for the skeptics.

In 2003 the city actively encouraged biotech by altering zoning regulations to allow for the higher ceilings and extra rooftop equipment necessary for laboratories. Yet in 2004, when Seattle BioMed moved to South Lake Union, the community was still less than alluring for many employees. The lingering decay and lack of lunch alternatives made the neighborhood unappealing.

But by the time that PATH was moving from Ballard in 2010, the neighborhood had reached a tipping point. The change was in part because … Next Page »

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Qualcomm (NASDAQ: QCOM) chairman and CEO Paul Jacobs revealed today that the San Diego-based wireless technology giant has been working with the X Prize Foundation to develop criteria for a new $10 million X Prize grand challenge that is straight out of Star Trek—a “Tricorder X Prize.”

The idea—which is still being distilled—is to offer a $10 million incentive prize to the team that can develop the first diagnostic device that actually works like the ubiquitous medical tricorder of Star Trek fame. Generally speaking, the technology would have to be portable, use wireless sensors, be minimally invasive, and capable of providing rapid, low-cost diagnoses of medical ailments and injuries. Oh, and organizers also want the gadget to be able to diagnose patients better than or equal to a panel of board-certified physicians.

Jacobs announced the proposal during a keynote speech this morning at a wireless health conference in downtown San Diego. The X Prize Foundation officially announced the collaboration in a statement issued at about the same time from its headquarters near Los Angeles.

The X Prize Foundation gained worldwide renown as the organizer of the $10 million prize for the first reusable civilian spacecraft. X Prize founder Peter Diamandis issued the challenge in 1996, and a team led by famed aerospace designer Burt Rutan—with financial support from Microsoft co-founder Paul Allen—won the $10 million prize in 2004.

“Part of prize development is to bring something to reality, but part of it also is to change the mindset,” said Jessica Ching, the foundation staffer who is responsible for developing the rules governing the competition. In the case of the X Prize for spaceflight, Ching says the Rutan-designed SpaceShipOne shattered the prevalent notion that only government-backed spacecraft could reach for the stars.

Spock with Tricorder

In a similar way, the Tricorder X Prize is intended to break the grip of conventional thinking in healthcare by extending the reach of health information and services to more people. “Health is important to everybody,” Ching said. Creating the prize, she added, “came from a real need and a desire to push for change.”

For now, however, the more immediate challenge lies in establishing the ground rules for a fair competition.

“It’s got to be really difficult, but not impossible,” said Ching. She estimated that developing guidelines for the Tricorder X Prize would take about six months—a process that Qualcomm is funding—and the foundation would likely formally announce the challenge sometime next year.

“What we have to do is take general characteristics and turn them into an objective set of criteria,” said Don Jones, Qualcomm’s Vice President of Business Development for Health and Life Sciences.

Ching, who also was attending the Wireless-Life Sciences Alliance Convergence Summit in San Diego, said that developing a portable medical diagnostic tool would require innovations across many technologies, including medical imaging, microfluidics, and wireless sensors. It also would likely require radical advances in such fields as artificial intelligence and decision systems.

In its statement today, the X Prize Foundation says, “This prize will bring understandable, easily accessible health information and metrics to consumers on their mobile devices, pointing them to earlier actions for care.” Or, as Qualcomm’s Paul Jacobs put it during his talk, “Imagine a future where the tricorder is just another app on your phone.”

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Oil, one of my college buddies who majored in chemical engineering once told me, is in everything. He was talking about not just the fuel that goes in your car, but also the petrochemicals in the laptop you type on, the chair you sit on, the clothes you wear, and the pharmaceuticals you take.

Kelly Ogilvie, the CEO of Seattle-based Blue Marble Energy, has made clear that he sees the world in the same way, and wants to do his part to see if we can come up with those essential chemicals in a more renewable way. Ogilvie, a veteran of former Seattle mayor Greg Nickels’ administration and Paul Allen’s Vulcan holding company, clearly knows how to put that kind of big picture story to work in helping build his alternative fuel/specialty chemical company.

So I’m pumped that Ogilvie has accepted our invitation to join the next big Xconomy Seattle event, titled “Separating Hype from Reality in Alternative Fuels.” This event, on the evening of May 19 at the Institute for Systems Biology’s new headquarters in South Lake Union, is truly shaping up into a star-studded affair for Northwest leaders in the renewable fuel industry. Ogilvie will be on hand to deliver one of our patented 4-minute “burst” overview presentations. If this (somewhat dated) company video is any indicator, he’ll do just fine when he gets handed the mike.

Kelly Ogilvie

Blue Marble is the latest company to join the list of standout presenters at this event. The group includes Michael Ramage of Redmond, WA-based Asemblon; Jan Allen of Harvest Power in Seattle; Jeff Surma of S4 Energy Solutions in Houston, TX and Bend, OR; and Hoby Douglass of Seattle-based General Biodiesel. Before they step up to the mike, I’ll moderate a conversation about the big picture with Kristina Burow, a co-founder of Sapphire Energy; Margaret McCormick, a co-founder of Matrix Genetics; and Ned David, the co-founder of Kilimanjaro Energy. We’ll also hear a brief presentation on an ambitious aviation biofuels initiative from John Gardner, the incoming dean academic affairs at Bainbridge Graduate Institute.

The early bird discount period for tickets has passed, but there are still seats available for students (undergrads, graduate students, and postdocs) for the bargain rate of $20. We also have made special discounts available to startups with less than 20 employees, as well as members of Climate Solutions, and the Washington Clean Technology Alliance. If you’d like to take advantage of one of those deals and join the conversation, go ahead and sign up here at the registration page. See you there on May 19 for another evening of big ideas and top-notch networking.

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As we dive into a new week in Seattle, Amazon Web Services‘ big cloud computing crash is still reverberating. The server-farm failure took out countless small sites and apps that rely on Amazon’s (NASDAQ: AMZN) market-leading service, and the company got low marks for its communication while attempting to fix the problem over several days. I talked to a cloud-computing expert and an entrepreneur about one interesting element of the outage: Why some big-name companies, with enough resources to protect themselves, were still taken down by Amazon’s problems. It was also fun to see Seattle startup BigDoor quoted in a New York Times story on the Amazon outage.

Elsewhere in Seattle-area tech and innovation news:

—Zillow had been making public overtures toward an initial public stock offering in the past few months, and made good on those hints by filing paperwork for an IPO—the first by a Seattle-area tech company since mid-2010. I talked to investors and entrepreneurs in the region to see what they made of the move and of some of the idiosyncracies in Zillow’s preliminary pitch. There’s a long way to go before any Zillow stock actually hits Wall Street, but early stage tech folks were feeling pretty bullish about what the filing means for the near future and a warming investment market. Just a few days later, RFID maker Impinj filed its own papers for an IPO—at up to $100 million, it’s nearly twice the size of Zillow’s target. PopCap Games also has targeted this fall as its preferred time to go public.

—I took a closer look at some of the inventions being cooked up over at Intellectual Ventures, the Bellevue, WA-based invention and patent company started by former Microsoft CTO Nathan Myhrvold. Plenty of people already know about IV’s TerraPower nuclear reactor, Photonic Fence mosquito-killing lasers, and of course the cookbook on steroids, Modernist Cuisine. But in this tour of Intellectual Ventures Lab, we got up close with some under-the-radar projects—ones that haven’t generated big headlines (yet), but are still showing huge potential. Two of the projects are in the arena of global health, a topic that Intellectual Ventures investor Bill Gates knows well—lab head honcho Geoff Deane says Gates’ ideas on major problems inform some of the projects.

—Microsoft (NASDAQ: MSFT) made sweeping changes to its pay system, including a bigger bonus budget and shifting more money into cash rather than stock. This was a clear response to all the Silicon Valley companies moving into the Seattle area with the express intent of hiring engineers and other tech talent— Google, Facebook, Salesforce.com, Zynga, Twitter, and others have branch offices or … Next Page »

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Even in his hometown, Paul Allen can seem like an enigma. His influence is everywhere, from sports teams to politics to real estate development. But because of his famously private ways, Allen is only occasionally seen and very rarely heard.

That made last Friday’s long public interview at Town Hall an interesting event. It was part of the publicity tour for Allen’s new autobiography, “Idea Man,” which already has garnered significant national press coverage. With that backdrop, many in the audience surely had a good idea of the headline material from the book itself: High school and startup days with Bill Gates, and semi-shocking tales of his co-founder’s ruthlessness in business.

So perhaps the most revealing thing about this appearance was the sense you could get of Paul Allen as an actual person, not some impossibly rich abstraction who builds crazy-looking museums, owns enormous yachts, and loses vast sums of money on investments.

“As everybody knows, I’m a pretty private person and I don’t do a whole lot of this. So I may not be here next year,” Allen said with a faux-sarcastic tone, drawing laughs from the audience.

I did sense that people weren’t quite sure what kind of guy he’d be at the beginning. Would he be stilted and geeky? Off-putting and too private? But the audience warmed up to Allen pretty quickly, helped along by his humorous asides and generally relaxed bearing.

Seattle is forever stuck with a little-brother mindset, not wanting to rocket past its slower small-town roots but also carrying a chip on its shoulder about not quite measuring up as a great American metropolis. People who live here want their representatives to be world-class, iconoclastic, giving, and not too stuffy. I thought Allen gave them some of what they were looking for.

The main message that came through, one that others have found in the book, is that Allen sees himself as a big-picture creative thinker—I guess the title “Idea Man” gives that away pretty quickly. In his Microsoft days, he portrays that quality as the necessary leavening element to Gates’ hard-driving, relentlessly focused business sense and work ethic.

“I basically get very, very excited about the creative process and creating things and having ideas,” Allen told interviewer Todd Bishop, of GeekWire. “When you see those ideas realized, it’s just a wonderfully rewarding thing.”

Although the autobiography is pretty clearly aimed at getting more credit for the success and innovations of Microsoft’s early days, Allen acknowledged that big ideas aren’t much use without the right team of people to make things happen. He also said there was a bit of luck involved in Microsoft’s genesis, … Next Page »

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

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

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

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

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

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

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When you’re one of the richest people in the world, your autobiography gets the deluxe publicity rollout. Exhibit A is billionaire Microsoft co-founder Paul Allen, whose new book, “Idea Man,” is about to hit the market.

The first excerpt, adapted in Vanity Fair, caused tons of headlines, mostly for its depiction of a heated fight with Bill Gates and Steve Ballmer—Allen accused them of trying to dilute his stake in the company while he had cancer, just before he left day-to-day duties behind.

Now comes the follow-up interview with 60 Minutes, which teased the segment today with a small story and video on its website. The interview was conducted by Lesley Stahl.

Among the glimpses we’re seeing now: Allen says the book was motivated not by revenge, but a desire to air his side of some major events in business and technology. “I just felt like it’s an important piece of technology history, and I should tell it like it happened,” he said.

Asked whether he and Gates will eventually have a bit of a showdown over what’s in the book, Allen said: “I don’t know about screaming, but I’m sure it’ll be a heated discussion.”

He also talks fondly about Gates visiting him while Allen was sick a second time with cancer. This goes to an element of the Vanity Fair excerpt that I thought was missed by a lot of the first-day coverage: Despite any sour feelings about old fights, it’s clear that Allen has some still-glowing feelings for his old partner. Like any good relationship, it’s complicated.

“There’s a bond there that can’t be denied, and I think we both feel that,” Allen said.

CBS said Stahl also digs into Allen’s recent wide-ranging patent suit against an array of big tech companies, and reports that Allen found the negative reaction “surprising, because I invested a huge amount to develop these ideas.” (60 Minutes also apparently got to check out the Octopus.)

Allen will be giving a live interview in his hometown as well, later this month at Town Hall Seattle. GeekWire’s Todd Bishop, who has covered Microsoft for years dating back to the days of the printed Seattle P-I, will do the questioning.

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The Allen Institute for Brain Science, the Seattle-based nonprofit founded by billionaire Paul Allen, is announcing today it has released what it says is the first comprehensive anatomical and genomic map of the human brain. The Allen Human Brain Atlas, based on two normal adult brains, showed about 94 percent similarity between the two specimens, the Institute said in a statement. The map is being made available as an online public resource to researchers around the world, the Institute said. The Allen Institute, founded in 2003 with a $100 million pledge from Allen, has previously released a map of the mouse brain.

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A juicy excerpt from billionaire Microsoft co-founder Paul Allen‘s new autobiography caused plenty of chatter around Seattle and the broader tech world this past week, and considering that he’s starting a book tour, I guess that’s the point. The stunning vignette, in the excerpt published in Vanity Fair, was a scene in which Allen writes that he caught co-founder Bill Gates and CEO Steve Ballmer conspiring to dilute Allen’s stake in the company while he was undergoing cancer treatment.

That blow-up, in Allen’s retelling, basically sealed his departure from day-to-day duties at Microsoft. Gates called Allen a friend in a reply statement, but did say he may remember events differently. In any case, I kind of thought the attention to that very noteworthy episode actually obscured the more nuanced, diverse portrait that Allen sketched of the two entrepreneurs’ relationship. Basically, it emerges as a complicated partnership—over the years traced in that writing, Allen is by turns amazed by, suspicious of, and angry at Gates. In any case, the whole book should be good reading.

—Amazon.com continued its march into new cloud-based businesses by rolling out a music player and storage service tied to Android devices. There was a lot of focus devoted to the spat that Amazon apparently kicked up by not securing licenses from the record labels. But the even more interesting angle may be that Amazon is leapfrogging ahead of other big-name competitors—especially Apple—by taking personal music collections up to the cloud for storage and playback in a variety of places. Basically, it looks like Amazon is trying to position its freemium service as iTunes for Android—which is a pretty nice market to pursue.

—I sat down with Don Merino from Intellectual Ventures, Nathan Myhrvold’s unique patent-licensing and invention firm in Bellevue, WA, to get an inside take on how the company went about setting up a first-of-its-kind modern, large-scale middleman market for intellectual property. Merino was a pivotal player in this tale, having personally purchased about half of the first 1,200 patents that Intellectual Ventures secured—the portfolio is said to number above 30,000 at this point. This topic gets more energy every week, it seems, particularly in mobile—just this week, Google announced it was going big in a bid for Nortel patents in a bankruptcy auction.

—We also checked in with the folks at Seattle’s Zipline Games, which rolled out its new Moai development platform and cloud-hosting service for professional game developers. Moai’s main selling point is that it tries to bust down language barriers in game building by letting developers use Lua, a familiar game coding language, and translating that work into the different formats needed to make mobile games … Next Page »

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[Updated: 3:45 pm] Omeros, the Seattle-based biotech company, went public back in the fall of 2009 partly on optimism that it had found a novel way to help people recover from knee surgery. Today, the company is reporting that the program was essentially a bust. Omeros stock fell 40 percent on the news in after-hours trading.

Omeros (NASDAQ: OMER) said today that its most advanced program in clinical trials, a combination of generic drugs designed to reduce pain and swelling in patients undergoing arthroscopic knee surgery, has failed. There was nothing to sugarcoat here—the drug, OMS103HP, failed to meet its goals in the third and final stage of clinical trials. Omeros blamed confounding factors in the studies, which means that if patients improved, it could have been caused by some other reason than the Omeros drug. And the treatment failed in more than one study. The Phase III program involved three clinical trials, composed of 1,040 patients, according to Omeros’ most recent annual report.

“We are obviously disappointed and surprised by the outcome,” Omeros CEO Greg Demopulos said in a statement.

The Omeros treatment is a combination of three generic pharmaceuticals—the anti-inflammatory compound known as ketoprofen, the pain reliever amitriptyline, and a blood vessel constrictor known as oxymetazoline. By adding that mix to a standard surgical irrigation solution, Omeros hoped it would help people suffer less pain, and ease the recovery from arthroscopic knee surgery. The market potential for something here is quite big—about 2. 6 million arthroscopic knee surgeries are performed each year in the U.S., and the numbers are only thought to go up as Baby Boomers get older.

Omeros is still combing through the data, and didn’t say in today’s statement what it plans to do next. The company said the latest findings do not appear to undermine use of the drug for a type of knee surgery known as meniscectomy.

Fortunately for Omeros, it hasn’t bet the entire company on OMS103HP. The company reported on some positive findings last week from a mid-stage study of patients on a drug for cataract surgery. And Omeros raised $25 million last year from Paul Allen’s Vulcan Capital and the state’s Life Sciences Discovery Fund to support a discovery program that hopes to uncloak a number of promising new drug targets known as G-protein coupled receptors.

Shares of Omeros dropped 40 percent in after-hours trading, down to $4.81 at 6 pm Eastern, following remarks by Demopulos on a conference call.

[Updated with comments from Omeros conference call.] While Omeros is still analyzing the data to determine what went wrong, Demopulos did note that there was a lot of variability in how the study was conducted over a period of years. It was designed so that a physical therapist performed a post-operative functional assessment of the patient. The problem in a large study, with multiple centers, is that there is bound to be a lot of variation in how those individuals perform the functional assessment, Demopulos said. Omeros tried to account for this with consistent training of clinical sites and follow up, Demopulos said.

The company’s cash position is now bound to attract more scrutiny. Omeros said it entered the year with $42 million in cash and investments, after burning through about $18 million of its cash balance in 2010. Demopulos assured analysts that the company is comfortable it has more than 12 months of cash left. Yet that comment was made based on some new information Omeros disclosed today. Omeros said in a separate regulatory filing today that it agreed to borrow $10 million from Oxford Finance in a transaction dated March 25th, and Demopulos told analysts the state Life Sciences Discovery Fund still owes Omeros a $5 million payment.

Demopulos didn’t try to hide the depth of his disappointment in the clinical result, but in his closing remarks, he urged people not to give up on the company.

“This is part of the business we are all in. At Omeros, we have an outstanding group of people, and we are building a company around a unique and valuable set of assets. While there are no guarantees, I don’t expect to make a habit of delivering this kind of news.”

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Vanity Fair got the first-excerpt scoop on Microsoft co-founder and Vulcan head honcho Paul Allen’s new book, “Idea Man,” and one element in particular is drawing most of the attention today: Allen’s depiction of a past rift with longtime friend and co-founder Bill Gates over Allen’s holdings in the company.

The Wall Street Journal has a nice follow-up story, based partly on a glimpse at the book provided to two of its reporters, that delves into the reaction among inner-circle Microsofties to that and some of the other Allen recollections.

The semi-sensational, rich-guy fight is doing its job in generating public relations buzz around Allen’s new book—after all, he’s setting off on a worldwide promotional tour. And I guess it makes perfect sense to choose a very Gates-centric portion for the first leak, because to the wider world, Paul Allen is often That Other Guy from Microsoft, who hasn’t worked at the company in a long time.

I do agree with other commentators that the vibe you get from reading today’s excerpted recollections is Allen seeing himself as a bit of a thinker and big-brother type to Gates’ hard-charging, brilliant entrepreneur: “Each time I brought an idea to Bill, he would pop my balloon … And he was right. My ideas were ahead of their time or beyond our scope or both.” But there’s also a bit of humility woven in there that I didn’t expect.

Allen clearly is still in awe of Gates’ mental prowess from their school days, even while he’s amused by the social oddities that Gates’ focus could produce.

I was particularly struck by Allen confronting his own intellectual limits at Washington State University, not exactly an Ivy League school, upon being totally perplexed by a blackboard full of equations: “It was one of those moments when you realize, I just can’t see it. I felt a little sad, but I accepted my limitations. I was O.K. with being a generalist.” I guess it’s worked out for him so far.

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Omeros has some news out this morning on one of the lesser-known members of its drug development pipeline.

The Seattle-based biotech company (NASDAQ: OMER) said today that its experimental treatment for patients undergoing eye surgery to correct cataracts was safe, able to maintain pupil dilation during the procedure, and reduce postoperative pain and irritation. The results—which Omeros said will be published and presented later in a scientific forum—were from a study of 221 patients that randomly assigned people to a control group, the Omeros combination product, or its two individual components. Based on the results, the company said it now plans to take the drug, OMS302, into the third and final stage of clinical trials normally required for FDA approval.

The findings are important for Omeros, giving something to potentially stir interest among investors. The company, which went public at $10 a share in October 2009, has been stuck in the doldrums, closing at $6.05 yesterday. Omeros pitched investors on the promise of an anti-inflammatory solution for knee surgeries that has been in pivotal testing for several years, although it still hasn’t presented final results. At a much earlier stage, Omeros has talked up the promise of its initiative to discover new drug targets, known as GPCRs, which it hopes will entice Big Pharma companies to form partnerships. That program is supported by $25 million from Paul Allen and Washington state’s Life Sciences Discovery Fund.

Omeros’ cataract program, by comparison, has gotten little attention. The market for a new drug could potentially be quite big, as there are about 3 million surgeries in the U.S. each year to correct vision impairments from cataracts, and the number is expected to climb as Baby Boomers get older.

Here’s what the study was about, based on Omeros’ statement this morning. Omeros developed a proprietary combination of two generic drugs that have been used by ophthalmologists for more than 15 years in irrigation solutions. One component minimizes inflammation, and one causes pupil dilation. The pupil dilation part is important because if it isn’t maintained throughout the procedure, then risks of injury during surgery go up.

The study showed that pupil dilation was maintained through cataract surgery, and that fewer people complained afterwards about moderate to severe pain, Omeros said. Both findings were statistically significant. Omeros didn’t say how much better the combo was than its individual components—a key point it will have to delineate if it is going to convince doctors to use a brand-name combination drug instead of a cheap generic one.

One prominent eye specialist quoted by Omeros today in its statement sound bullish. “These data are compelling and could represent a major advance for lens replacement procedures, including cataract surgery and refractive lens exchange. OMS302 has the ability to facilitate the ease of the procedure while improving patient outcomes and safety,” said Alan Crandall, director of glaucoma and cataract, senior vice chairman of ophthalmology and visual sciences at the Moran Eye Center at the University of Utah.

Taking this latest program into pivotal trials certainly won’t be cheap, and Omeros doesn’t have unlimited resources. The company said it ended 2010 with $42 million in cash in the bank, down from $60.3 million a year earlier. With a depressed stock price, it’s no easy thing to raise more money, so it will be interesting to see if investors find this eye surgery solution compelling enough to help finance it all the way to FDA approval.

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The Allen Institute for Brain Science, the Seattle-based nonprofit backed by billionaire Paul Allen, said today it has hired Christof Koch as its new chief scientific officer. Koch comes from Caltech, where he spent 25 years on the faculty studying biophysics, neural computation, and neural systems, the Allen Institute said in a statement. “We are absolutely thrilled to have someone of this caliber directing our scientific efforts,” said Allan Jones, the Allen Institute’s chief executive officer, in a statement.

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Most people on the street would struggle to define what an angel investor does. Mostly, in Seattle anyway, they are the little-known startup investors who operate behind the scenes while venture capitalists get all the glory for bankrolling the would-be Googles and Facebooks of the future. But for a few minutes yesterday, Seattle angels got a moment in the sun on the KUOW-94.9 FM radio show, “The Conversation.”

I was happy to be the guest on “The Conversation” with Ross Reynolds, for a five-minute segment on the latest local trends in angel investment. Reynolds started off by asking about a recent report from the Seattle-based Alliance of Angels, which said it had invested $10.3 million last year in Northwest companies—up from $9.1 million a year earlier.

For those new to the whole concept of angel investment, I tried to make it a little more familiar by dropping a couple famous names like Paul Allen of Vulcan and Jeff Bezos of Amazon—who are a whole lot better known for things other than their angel investments. Bezos, in particular, was recognized by BusinessWeek last year as one of the nation’s top angels, for his shrewd early bets on Google and Twitter. On the local scene, I noted that Pacific Bioscience Laboratories, the Bellevue, WA-based maker of the Clarisonic skin brush, is one of the clear hits that emerged after getting support from Seattle-area angels.

Of course, I had to point out that while the increase in angel investment is encouraging, it’s not exactly a potent enough force to turn around the local economy. For every angel investing success story like Pacific Bioscience Laboratories, there are probably dozens of companies that never got any traction, and whose names nobody can really remember (or which nobody wants to remember).

It was a fun interview, and at least one Xconomy reader tells me it sounded good (although I must say I think my voice sounds really dorky on the air.) If you’d like to listen to the five-minute segment, you can follow the link here to the KUOW website. The angel investment segment comes up about 10 minutes and 10 seconds into the show.

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Funium, a San Francisco game development startup, said in its blog today that it has collected $1.2 million from individual investors to expand its geneaology-oriented Facebook game Family Village. Investors included FamilyOdyssey, half owned by Sorenson Media founder Jim Sorenson, and Paul Allen’s FamilyLink.

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The early scuttlebutt was right on the mark. Seattle-based Gist, which was reportedly in talks to be acquired by Research in Motion back in December, has closed the deal and agreed to be sold to the giant maker of BlackBerry smartphones.

Gist, which makes software to help people keep track of their contacts online, said today on its website that it has become part of Waterloo, Canada-based Research in Motion (NASDAQ: RIMM). Terms of the deal weren’t disclosed. GigaOm first reported that an acquisition was in the works back in December.

Gist CEO T.A. McCann told TechFlash today that all 20 employees of Gist will stay on with RIM, including McCann, who will become a vice president. I’ve heard no word yet on how big of a return this might represent for Gist’s venture backers. The company, founded in 2008, took in a $4 million financing from Paul Allen’s Vulcan Capital and the Foundry Group back in July 2010. That was a year after the company’s $6.75 million Series A round.

RIM has long been a major force in the wireless business, but has seen its early strength in market share eroded by a competitive onslaught from Apple’s iPhone, handsets based on Google’s Android operating system, and now Microsoft’s latest entry, the Windows Phone 7 platform. I have sent in a few questions to Gist founder T.A. McCann about this deal, and how he thinks Gist can help strengthen’s RIM’s offerings in the current competitive landscape.

“We are extremely excited about our future at RIM and how Gist will be used by millions of BlackBerry users around the globe,” Gist’s Robert Pease wrote in a post on the company blog. “This is a huge step towards our goal of utilizing the web-based Gist experience to allow users to build stronger professional relationships.”

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