Aptera, the sleek carmaker backed by Google and Idealabs, didn’t respond to my inquiry earlier this week about reports of an internal split in which founders Steve Fambro and Chris Anthony had left the company. But in an online report published today by The San Diego Union-Tribune, Aptera officials rejected accounts that Fambro and Anthony were ousted in a boardroom showdown.

The company’s status is a keen issue to some 4,000 people, including celebrities Tom Hanks, Robin Williams, and Shaquille O’Neal, who have put down $500 deposits to be the first to buy one of the three-wheel, two-seater vehicles. The Aptera 2e, the company’s first production vehicle, resembles a wingless plane and is expected to cost between $25,000 and $40,000. Aptera is based in Vista, CA, about 30 miles north of San Diego.

Citing a statement issued by Aptera CEO Paul Wilbur, the Union-Tribune says the carmaker had to adjust its production schedule “to align with financing realities.” Instead of producing its first fuel-efficient model in the fall of 2009, as Aptera announced at the beginning of this year, Wilbur says the company will complete its first vehicles in 2010. About 10 of Aptera’s 40 employees have been laid off.

The company, which has raised at least $27.5 million from Google, Idealabs, and other venture investors, is seeking additional funding, according to Popular Mechanics. Aptera says it also intends to resubmit its application for a $75 million loan from the Department of Energy’s Advanced Technology Vehicles Manufacturing Incentives Program.

Aptera says co-founders Fambro and Anthony were not asked to leave. Fambro remains on the board, but has taken a leave of absence from the company until next year. Anthony is now the CEO of Flux Power, a startup in the San Diego area that is developing battery-management systems. In another online account published by Popular Mechanics magazine, Fambro also voiced his continuing support for CEO Wilbur.

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San Diego’s Fallbrook Technologies says it has struck a deal for what is literally a “greenfield” application of its NuVinci continuously variable transmission. The venture-backed company, which has been steadily expanding the market for its transmission technology, has signed a licensing agreement with Hydro-Gear of Sullivan, IL, a leading maker of drive systems for lawnmowers and the outdoor power equipment market.

Under the agreement, Fallbrook and Hydro-Gear say they will develop a new application—an infinitely variable transmission (IVT) for zero turn radius (ZTR) riding mowers, which pivot rather than turn, as well as other types of mowers, and garden equipment. The IVT transmission, which incudes forward, reverse, and zero output (idling) within its range of gearless input-to-output ratios, enables the mower to move quickly forward and backward without manual shifting. The innovation represents the latest in a series of technological advances over the past decade that have transformed riding mowers into more powerful, sophisticated, and versatile machines that also are used to plow snow, haul firewood, and carry out other chores.

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If you’ve seen from the inside how technology startups get created and funded, you know that law firms are involved at every step in the process. But to outside observers, it might be surprising just how central a role the attorneys can play—not just by helping entrepreneurs with incorporation papers and the other legal rigmarole of starting a business, but by connecting them with the right venture capital firms and making sure investments are structured fairly for both the founders and the venture funds. And while nobody likes to pay legal fees, a good outside attorney can literally save a company when things start to go south: an experienced firm can help straighten out founder-investor conflicts or line up emergency financing, for example.

Given that Boston was the birthplace of venture financing, it’s probably not surprising that it’s also home to a large group of law firms specializing in company creation and financing. Indeed, you can’t go far in the startup world without bumping into names like Cooley Godward Kronish, Edwards Angels Palmer & Dodge, Foley Hoag, Foley and Lardner, Goodwin Procter, Mintz Levin, Proskauer Rose, Ropes & Gray, Nutter, and Wilmer Hale (see tables on this page and page 4). Several of these firms are home to former partners from Testa Hurwitz, the Boston firm that more or less invented the modern corporate technology practice; Testa launched and represented scores of Boston-area startups, venture capital funds, and technology giants between its founding in 1973 and its dissolution in 2005.

Last week I sat down with Tom Burton and Lewis Geffen, two attorneys from the corporate practice at Mintz Levin’s Boston office, to hear more about how law firms fit into the local innovation ecosystem. Founded here in 1933 by Herman Mintz, Benjamin Levin, and Haskell Cohn—three Harvard Law School graduates turned away by Boston’s white-shoe firms because they were Jewish—Mintz Levin now has nearly 500 attorneys, making it Massachusetts’ fourth-largest law firm. It has long represented Biogen Idec—one of the first big biotechnology success stories—and was intimately involved in AOL’s acquisition of Time Warner in 2000. The firm also has major operations in San Diego. And under Burton’s direction, it has developed a booming practice representing clients in the energy and clean technology sectors on both coasts. Many of the firm’ clients turn up regularly in these pages, including EnerNOC, Greatpoint Energy, FloDesign Wind Turbine, General Catalyst, and Rockport Capital.

At Mintz Levin’s office near San Diego’s Carmel Valley, partner Carl Kukkonen tells Bruce, “We represent a lot of small, pre-funded venture-backed companies as well as multi-nationals.” Kukkonen, who was among the lawyers to open the San Diego office in 2006, adds, “I like to tell people I was working with solar, fuel cell, and battery companies before I ever heard of the term ‘cleantech.’”

From Mintz Levin’s 43rd-floor conference room at One Financial Center in Boston, one can peer down on the Federal Reserve building, the Custom House Tower, and every downtown landmark. It’s a far cry from the brick warehouse district of Kendall Square where we scribes at Xconomy spend most of our time—but the visit was an interesting reminder, for me, of all the high-level networking, negotiation, advice, and other homework that goes into getting a technology startup off the ground.

In my interview with Burton and Geffen, portions of which are transcribed below, we covered everything from the state of the cleantech industry and the challenges of working for both startups and venture funds to non-compete agreements and that old chestnut, the difference between East Coast and West Coast investing cultures.

Xconomy: Explain to me how Mintz Levin wound up developing an energy and cleantech practice.

Tom Burton: One thing that’s interesting about Mintz is the entrepreneurial nature of the firm itself, and the way it moves into markets that other firms haven’t placed a bet on. I was pitched that back when I joined the firm in 1996, and I chose Mintz over a lot of safer bets like the Skadden Arpses of the world.

Lewis Geffen: At Sherman and Sterling in New York, where I spent my first five years, no one ever thinks “I have to produce business somehow.” At Ropes & Gray or Wilmer Hale, new associates are simply given work. Whereas we teach “business development 101″ to our associates. It’s part of our fabric here.

TB: For me, all I knew was that I wanted to build something that hadn’t been built before. I wasn’t sure what it was going to be, but I trusted in the firm’s pitch, and took advantage of some luck. When I was a second-year associate, I brought in my first client, who …Next Page »

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Regulatory documents filed today show that Heartland Robotics, the Cambridge, MA, industrial robotics startup founded by MIT computer science legend Rod Brooks, has raised just over $7 million in an equity offering. The documents don’t reveal the identities of the funders, and Heartland has not announced the names, but Xconomy has learned that one of the investors is Bezos Expeditions, the Seattle-based venture investing operation of Amazon (NASDAQ: AMZN) founder and CEO Jeff Bezos.

Reached this afternoon by phone, Heartland president Patrick Sobalvarro confirmed that the offering had taken place, but described the lead funder in the round only as a “top tier” investing firm. He says Heartland plans to make a formal announcement about the investment soon, but has not yet obtained clearance from the funders to release their names.

A bit of detective work shows that Bezos Expeditions is one of them. Heartland’s regulatory filing—a standard “Form D” that privately held companies must file with the Securities and Exchange Commission when selling stock—includes Melinda Lewison in the “related person” field, which is usually reserved for company founders, executives, and board members. Lewison is a principal at Bezos Expeditions.

Lewison did not immediately respond to Xconomy’s request for confirmation and comment about the investment. But we have confirmed through another source that Bezos is one of the participants in the round.

Heartland, founded last fall, is still in stealth mode, but Brooks said last year that the company’s robotic technology is designed to empower laborers in manufacturing facilities to be more productive. Brooks, who is chairman and chief technology officer at Heartland, has said in discussions with Xconomy that he is “trying to do for manual workers what PCs did for information workers, i.e., let ordinary manual workers become their own information engineer and increase their own productivity.”

Sobalvarro, an MIT-trained computer scientist who previously founded surveillance video analysis software company IntelliVid, said Heartland is not yet prepared to add detail to that story. “What I would say is that we’re at a stage where we’ve really got the business proposition clearly confirmed,” he says. “We’ve been working with a couple dozen manufacturers and …Next Page »

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KidZui, a San Diego Internet startup for children, says it is launching ZuiTube—a kind of YouTube with a user-interface designed for kids and a library of almost 60,000 videos pre-approved by an editorial team of parents and teachers.

The online video destination is free, but the essential challenge for ZuiTube, like KidZui itself, is differentiating itself from such child-friendly rivals as PBSkids, Webkinz, Nickelodeon, and Club Penguin. KidZui’s chief advantage is it provides a way for children to visit thousands of Web sites while preventing them from straying into the seamy and even predatory parts of the Internet.”KidZui is not a walled garden,” says co-founder Cliff Boro, the startup’s chairman and CEO. “From a kid’s point of view, this is all about freedom and independence.”

Yet KidZui has boundaries. The late architect Charles W. Moore famously described Disneyland as a place where children can safely learn the skills of adulthood (by driving the looping concrete freeway of Autotopia, for example) without risking any permanent harm. The same can be said for KidZui, which offers s a different sort of magic kingdom—where kids can safely hone their skills in Internet browsing, online gaming, social networking, and video sharing. The company was founded three years ago by Boro, Vidar Vignisson, and Tom Broadhead with the goal of erasing parental fears about websites that might be icky, shocking, and even dangerous for children while at the same time empowering kids to independently explore the Web.

KidZui User Interface

The company launched its parental-control Internet service with considerable fanfare in March 2008. The company says its KidZui browser, which is an add-on for the Firefox Web browser, allows children to explore more than 600,000 websites, watch videos, and play games that have been screened and approved by an editorial team of 200 parents and teachers. Within KidZui’s software, kids also can create their own cartoon-like avatar, a persona known as a “Zui” with customized hair, clothing, and other features.

KidZui’s basic service is free, but parents can sign up for weekly e-mail reports that detail all the websites their kids visit. KidZui’s membership privileges also gives parents veto power over the catalog of Web sites their children visit.

“I started an Internet company when I was 24 in 1994,” says Boro, who tells me …Next Page »

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It was a light week for technology stories in San Diego last week, as I took time away from Xconomy for a family road trip through the Pacific Northwest. The traffic along Interstate 5 was mild, however, in comparison to the record Internet traffic on Xconomy’s San Diego website for our two-part story about SAIC, Network Solutions, and the rise of the Web. Read on for that and the rest of last week’s news.

—Mike Daniels, a former senior executive at San Diego-based SAIC (NYSE: SAI), told me the San Diego research and engineering contractor also known as Science Applications International Corp. probably made five or six offers before it finally acquired Network Solutions of Herndon, VA, for $4.7 million in 1995. In a follow-up Q&A, SAIC founder J. Robert Beyster said that by 2000, the company had realized billions on its investment.

—San Diego’s Rayspan is using $12.5 million in Series B venture funding to advance its work on a smaller, more sensitive, and more versatile antenna for mobile devices. The technology under development at Rayspan is known as MIMO, for multiple-input-multiple-output, and it could pose a threat to rival embedded antenna technology developed by San Diego-based Ethertronics.

—Qualcomm (NASDAQ: QCOM), the San Diego-based wireless chipmaker, and Verizon Wireless said they are forming a joint venture to encourage corporations to use Verizon’s cellular network for more than phone services. Using machine-to-machine (M2M) wireless technology, for example, public utility companies could monitor and interact with circuit breakers, transformers, and other equipment to manage the power grid more efficiently and reliably.

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San Diego-based Covario, the software analytics startup that specializes in search engine optimization, or SEO, is introducing new software-as-a-service that poses a direct challenge to web development agenices. The company says their program automates the process of analyzing web traffic at a customer’s corporate website, a time-consuming job often performed by agencies. Covario’s program scores a customer’s website, ranging from 0 to 100, based on 56 factors that determine how well optimized the site is for Internet search engines. A spokesman says Covario charges from about $1,000 to $3,000 a month, depending on the size of the customer’s website.

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When Louisiana Gov. Bobby Jindal announced that a startup automaker based in San Diego will build a new line of fuel-efficient cars in Monroe, LA, nobody was more surprised than some folks at Cleantech San Diego.

The V-Vehicle Company, founded in 2006 by former Oracle executive Frank Varasano, says it “will produce a high-quality, environmentally friendly, and fuel-efficient car for the U.S. market.” But where did this secretive company come from? Why is it based in San Diego? And how green is V-Vehicle? The company provided no details about the car itself, such as what type of fuel it will use or specifically why it is environmentally friendly.

“We’re trying to be protective of the things we need to be (because of potential competition),” Varasano told reporters at the briefing in Monroe, LA. The only other tidbit disclosed is that Tom Motano, who’s credited with designing Mazda’s MX-5 Miata, is leading the V-Vehicle design team.

The news naturally piqued the curiosity of some board members at CleanTech San Diego, a non-profit industry group formed to accelerate the region’s legions of green technology and alternative energy companies. One CleanTech San Diego board member told me he wonders what the ‘V’ in V-Vehicle stands for: V-8? Victory? Virtual? Vaporware?

“Most people think it stands for Varasano,” says Joe Fisher, a spokesman for the company. (Before his stint at Oracle, V-Vehicle’s founding CEO was an engineering and manufacturing practice leader at Booz Allen Hamilton. Varasano earned his M.B.A. from Harvard, and served aboard the nuclear submarine Patrick Henry after graduating from the U.S. Naval Academy.) But Fisher says the V instead refers to “value.”

V-Vehicle Headquarters

Another question: Why is V-Vehicle’s headquarters in San Diego? A little online research shows V-Vehicle’s corporate headquarters is on 16th street, just east of the Padres’ new baseball stadium downtown. But there’s not much to see at the refurbished gray two-story building, with its Art Deco-inspired façade. Fisher says that’s easy to explain: V-Vehicle is based in San Diego because Varasano lives here.

Among other tantalizing facts observers are pondering is that V-Vehicle’s investors include the famed Silicon Valley venture firm Kleiner Perkins Caufield & Byers, which also has invested in Fisker Automotive, the Irvine, CA, company developing the $80,000 Fisker Karma, a plug-in hybrid electric luxury car. Kleiner managing partner and former Oracle President Ray Lane, who also serves on the boards at Fisker and electric carmaker Th!nk North America, is chairman of V-Vehicle’s board.

Perhaps because of Kleiner Perkins’ backing, at least one …Next Page »

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[[Updated: See editor's note below.]]

Founder Collective, a new seed-stage venture fund in Somerville, MA, has received total investments and commitments of $30 million from limited partner investors, Eric Paley, a general partner of the firm, told Xconomy in an e-mail. Yesterday the firm filed papers with the SEC that show that it has raised $24.4 million out of a planned $50 million in investments, but Paley noted that the group has garnered additional financing committments since the papers were finalized.  The firm was founded by Paley—a former senior advisor to IDG Ventures (now Flybridge Capital Partners) and the co-founder and former CEO of Brontes Technologies, which was acquired by 3M—and by David Frankel, the co-founder of The Internet Solution.

[[Editor's note: This news brief was updated to report that Founder Collective has recieved additional investment commitments for its seed fund since filing documents with the SEC.]]

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San Diego-based H2O Audio has raised more than $1.7 million in venture funding. Among other things, the startup plans to use the capital to roll out a new product line of its waterproof housings and headsets for the Apple iPod and MP3 players.

H2O Audio CEO Kristian Rauhala told me today that $1 million of the total was part of an earlier $6 million commitment that Steelpoint Capital Partners made to the company, and $756,250 was in additional funding. Steelpoint has been H2O’s sole backer since Southern California’s Tech Coast Angels provided early stage funding in 2004.

CEO Kristian Rauhala

H2O Audio’s cases and related products are designed for use in surfing, kayaking, diving, and other action sports. H2O has recruited U.S. Olympic gold metalist swimmer Natalie Coughlin and big-wave surfer Laird Hamilton, who is a member of H2O Audio’s board of directors, for its marketing campaign. “We bring music to sports. Your sport, your music. Our mission is to establish the H2O brand even further,” Rauhala says.

Rauhala says H2O Audio currently has 15 employees. He’s planning a new H2O product roll-out  this summer. The company, which already sells its products through BestBuy and at Apple stores, plans to begin selling at Target as well. Rauhala, who is an avid surfer, founded the company in 2002. He’s a former Nokia manager in Finland and a former regional manager for Elektrobit in San Diego.

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When Luke checked in at Trius Therapeutics almost six months ago, he reported that the San Diego life sciences startup was on a roll, but not quite ready to talk about results of its early stage clinical trials. These days, CEO Jeff Stein says Trius is assessing how best to move ahead in its development of a new anti-bacterial drug, based on results that he characterized as very encouraging.

In developing the drug known generically as torezolid, Stein told me Trius hopes to crack a market for treating MRSA and other drug-resistant infections that is now dominated by Pfizer’s linezolid (Zyvox). He described linezolid, which was approved by the FDA in 2000, as a “blockbuster drug” that generates over $1 billion a year. Linezolid is the only approved compound in the oxazolidinone class of drugs, Stein says, “so for years, just about every anti-infective company has been interested in getting a follow-up drug to Zyvox.”

Trius quickly completed its early stage trials last year, and in January enrolled 180 patients with nasty skin infections in a mid-stage clinical trial. It’s intended to examine the safety and efficacy of torezolid administered orally at three dosage strengths once daily over a five-to-seven day course of treatment.

Trius says more than 90 percent of the germs infecting patients in the trial were Staph infections, and 70 percent of the Staph infections were the “superbugs” known as MRSA, for Methicillin-Resistant Staphylococcus aureus. Trius intends to provide more detailed results of its trial in two or three months, but Stein told me, “Overall, we had about a 96 percent cure rate from our Phase 2 clinical trial.”

In order to go to Phase 3 trials, Stein says, “We’ll either have to do another round of fundraising or bring on a strategic partner.” He says he wants to begin those trials by early next year.

The company has advanced rapidly over the past two years, which Stein says is a testament to the company’s success recruiting key …Next Page »

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One of the difficulties in writing about Tyson McDowell is knowing where to begin.

McDowell is the 27-year-old CEO and co-founder of Benchmark Revenue Management, a San Diego company that has developed financial management software designed to help hospitals handle billing and collection issues more efficiently. He has been an entrepreneur since he was 14, and helped invent the PandaCam at the San Diego Zoo when he was 18. Oh, and McDowell also is a pilot who flies an ex-Soviet fighter jet in his spare time.

At Benchmark, McDowell has created business management software that helps hospital administrators prioritize their most pressing billing issues. The company’s technology also helps hospitals monitor and analyze their revenue cycle and business workflow. McDowell explains that hospitals lose a lot of money from low collection rates, but with Benchmark’s software, they can “reverse-engineer” the billing process, enabling managers to increase their collection rates and bring more efficiency to business operations.

“Hospitals really don’t know what they don’t know,” McDowell says. “We save them money.”

McDowell calls himself “a passionate entrepreneur,” and that’s how he sounds, too. “We want to be the service provider to all healthcare administration,” he says. The young entrepreneur was just 19 when he launched Benchmark, which now has a dozen employees and counts seven hospitals as customers, including St. Joseph’s Hospital in Atlanta, GA. McDowell spends a lot of time traveling and training clients to use the software, as well as recruiting new customers.

After eight years, though, McDowell has been asking himself a recurring question: “Where should the company go from here?”

To help find some answers to that question, McDowell recently put himself and Benchmark onstage, by volunteering to serve as a business case study for a regular monthly meeting of the MIT Enterprise Forum in San Diego. After making …Next Page »

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San Diego-based Ambrx Inc. just raised another $10 Million in new equity funding, according to documents that Ambrx filed with the SEC today. The privately held biotech’s mission is to develop breakthrough therapeutics with genetically-engineered drugs. The company was founded 2003, and as Luke reported last month, previously raised $96 million in venture capital.

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It’s official: Google has launched a venture investing wing called Google Ventures, and Rich Miner, who is based at the company’s Cambridge, MA, office and is the former leader of its Android mobile operating system project, is one of the managing partners.

A sharp-eyed reporter for Reuters broke the news about Miner’s new job on March 20, after spying a nametag at a Silicon Valley investing event that identified the Android guru as part of Google Ventures. At the time, the company would only tell Reuters that Google Ventures was “a project we’re working on,” with no further details forthcoming.

Last night, though, Google went public with the project, in a company blog post written by Miner and his co-managing partner, Bill Maris, an entrepreneur and former neuroscientist hired by Google to start the fund. Miner and Maris said Google Ventures will make early-stage investments in a range of industries; they mentioned the consumer Internet, software, cleantech, biotech, and healthcare by name, but that added the firm would also invest in “other areas we haven’t thought of yet.”

Coincidentally, I’ve been in touch with Miner recently about next week’s Xconomy Forum on the Future of Mobile Innovation in New England, where he’ll be participating in a fireside chat that I’m moderating. So this morning, I had a chance to ask him a couple of questions by e-mail.

I asked him first whether he will be staying in Boston, and whether he will function, in effect, as Google Ventures’ eyes and ears on the East Coast. Related to that, I asked whether he’s optimistic that the New England area is a fertile place to hunt for young, investment-worthy startups.

“I am staying in Boston as an East Coast partner,” Miner replied. “We think New England is a great place to be. It’s a fertile ecosystem with the right combination of top universities, seasoned entrepreneurs and experienced management.”

I also asked Miner about Google Venture’s areas of emphasis. According to a FAQ published as part of the new Google Ventures website, the fund will not be a strategic vehicle for future acquisitions by Google. But I wondered whether Google Ventures will be putting any special emphasis on investing in companies whose technologies are allied in some way with Google’s oft-stated mission “to organize the world’s information and make it universally accessible and useful.”

“I would not say special emphasis,” said Miner, “but we are able to look at startups with the domain knowledge of Google and we leverage that to help guide our thinking about possible investments.”

I take that to mean that as Googlers, Miner and Maris will be looking at companies through a Google lens—which could mean that startups with ideas about how to improve people’s access to information will have a leg up in the vetting process. But Google also has an increasing range of other interests—including, for example, green initiatives to reduce the company’s carbon footprint, and, through the non-profit Google.org, global health and citizen empowerment.

Numerous press reports, including one today in the Wall Street Journal, have said that Google plans to commit $100 million to the new venture fund. However, last night’s announcement named no specific figures. The Google Ventures FAQ says the company is “able to invest amounts ranging from seed funding to tens of millions of dollars, depending on the stage of the opportunity and the company’s need for capital.”

Why would Google start a venture operation—especially considering, as Bob pointed out last week, that corporate venture wings have a generally mixed record of success? Well, venture investing, with the right dose of skill and good fortune, is still one of the best ways to make lots of money—and the Google Ventures FAQ makes it clear that the fund will be looking for companies with “the potential for significant financial return.”

But as with most Google projects, there seems to be something more at work here—call it a spirit of irreverent inventiveness. “First and foremost, we’re looking for entrepreneurs who are tackling problems in creative and innovative ways,” the FAQ says. And the company clearly believes that its internal intellectual resources in areas like search, advertising, marketing, networking, user-interface design, and fundamental computer science—what Miner calls the company’s domain knowledge—put it in a unique position to scout out and support innovative young companies in similar areas. The fund’s tactical approach, Miner and Maris wrote in last night’s blog post, will be to marry “the best practices of top-tier, financially focused venture capital firms” with “Google’s unique technical expertise and brand.”

The state of the economy may also have been a factor in the founding of Google Ventures. As Miner and Maris wrote in the Google blog, “Economically, times are tough, but great ideas come when they will. If anything, we think the current downturn is an ideal time to invest in nascent companies that have the chance to be the ‘next big thing,’ and we’ll be working hard to find them.”

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A panel discussion about what’s happening on Wall Street sponsored yesterday morning by the San Diego Venture Group made it clear that venture investors are looking for pockets of light among the remains of last year’s market collapse. The general tenor of the conversation was that capital remains scarce and it’s going to take a long time for our financial markets to recover.

A defining moment in the discussion seemed to occur after the moderator and longtime technology analyst Harry Blount asked, where can companies go now if they start to run out of cash? The answers offered by the panel, which consisted of three experts in venture investing and lending, weren’t particularly encouraging.

But Zach Warren, a managing director of New York’s Guggenheim Partners, offered an interesting suggestion near the end of the breakfast session. After Blount asked the experts to identify sectors that are still attractive to investors, Warren seemed to get a lot of heads nodding when he said, “There’s an enormous opportunity to form new banks and broker-dealers—and just go out and take massive market share.” He mentioned that billions of dollars in federal bailout funding have gone to help prop up financial institutions considered too big to fail. Imagine what could happen, Warren suggested, if someone started a new bank with $3 billion in capital. “The opportunity is just too big to start a bank that doesn’t have the legacy problems these other banks have,” he said.

Glen Kacher, who oversees mostly software-related investments as a managing director in the Menlo Park, CA, office of Integral Capital Partners, said he oversees public companies such as Intuit and Adobe as undervalued opportunities. As a sector for potential venture investing, Kacher said he sees companies that specialize in software-as-a-service as “a major growth vehicle.”

Kacher later voiced skepticism about the cleantech and renewable energy sector, saying, Silicon Valley’s VC firms poured hundreds of millions into ethanol startups without thinking through to the billions of dollars required to finance production projects. “It’s easier to innovate on ones and zeros than it is on material sciences and physics,” he said.

Ric Spencer provided a different perspective, however, on the cleantech sector. Spencer, who oversees a global media and telecommunications investment banking group at Bank of America/Merrill Lynch in Silicon Valley, said he views cleantech innovation as a growth industry—especially with the federal economic stimulus package allocating $55 billion to develop such technologies. “There are too many dollars are being spent on the sector, and it just seems like there’s too big of an opportunity to ignore,” Spencer said.

As for the long-term ramifications of the stimulus plan, Warren said, “Conservatism now rules the day. The companies that can do bridge loans today are Verizon and Pfizer.” Spencer agreed, saying, “I think we’re in a period of extreme caution. Today, it’s much more about value, and there’s a thirst for yield.”

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It’s been a little over six months since Brandon Nixon moved into the driver’s seat as CEO at San Diego-based DriveCam, a venture-backed company that uses a combination of technologies to help reduce risky driving behaviors. That seems like enough time for a new boss to get up to speed, so I stopped in recently to ask Nixon why he agreed to take over a startup that’s already got some mileage on the odometer.

Nixon has his reasons, three to be specific, all related to the potential growth he sees for the company and its technology. And his reasoning carries some weight. As a general partner at Housatonic Partners, Nixon oversaw the private equity firm’s investments in a number of telecommunications-related companies. In 2002, he stepped into the CEO’s job at a Housatonic portfolio company, Enerdyne Technologies of El Cajon, CA, and led Enerdyne’s sale four years later to ViaSat (NASDAQ: VSAT) of Carlsbad, CA, for $17 million.

So in essence, by naming Nixon as CEO, DriveCam was redefining itself as less of a video technology company and more of a data communications technology business.

Yet DriveCam’s business strategy has only come into focus since 2005, when the company got about $50 million in venture funding from San Diego’s JMI Equity, Silicon Valley’s Menlo Ventures, New York-based Insight Venture Partners, and Integral Capital Partners, the Menlo Park, CA, firm that also put money into Google, Akamai, and Qualcomm.

Until then, DriveCam was mostly bootstrapped, although spokesman Eric Cohen says “there’s not a lot of historical information” available now about the first seven years. The company was founded in San Diego in 1998, after Australian inventor Gary Rayner experienced one of Southern California’s infamous road rage incidents. His idea for mounting a small video camera on the dashboard was novel enough to win a most-innovative product award in 2000 from Connect, the San Diego non-profit group that promotes technology and entrepreneurship. The device combined hardware and software to store unbiased video clips that served as an unbiased eyewitness to traffic accidents and other highway incidents.

Fast-forward 11 years, and it now seems as though hardly a cable TV channel goes by without seeing reality TV video footage of some terrifying high-speed police pursuit that was recorded by the dashboard-mounted camera in a patrol car. “There are a lot of crash recorders on the market,” Nixon conceded. But the company learned a long time ago there wasn’t much demand for …Next Page »

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If there’s a theme to be found in the innovation news for San Diego last week, it might be comings and goings. While some companies are making layoffs or even shuttering their doors, we also found a number of new startups taking root here (although not as many as a year ago).

—In a report on San Diego’s innovation economy, the non-profit business group Connect found 73 new technology companies were started here during the last three months of 2008, a 58 percent decline compared to the year-ago period. It’s a sign the local tech economy is down, but not out.

—Luke profiled Amira Pharmaceuticals, a biotech startup founded in 2005 that is developing a drug to treat pulmonary fibrosis. In this recession, it’s worth noting that the three scientists who started Amira joined forces after Merck had shut down the San Diego operation where they had worked.

—A different kind of start-over is San Diego-based SpectraScience (OTCBB: SCIE). After salvaging the biomedical equipment maker from bankruptcy in 2004, local entrepreneur Jim Hitchin is just beginning to sell the company’s updated “optical biopsy” machines. The technology combines a low-power, fiber-optic blue laser with computerized spectroscopy.

—Another new biotech that Luke profiled is San Diego’s Pico Pharmaceuticals. The company is using research out of New York’s Albert Einstein College of Medicine to develop highly specific small molecule drugs that bind more tightly to their receptor targets.

—JP (Juha-Pekka) found that Dotmatics, a U.K. bioinformatics and visualization software developer, has opened a satellite office near San Diego as part of its expansion into the U.S. life sciences market.

—Sorenson Media, a Salt Lake City-based developer of video compression and encoding software, also has opened a new San Diego office to serve as the central hub of its business operations.

—On the other side of the ledger, I rounded up more layoffs that have come to light in San Diego in recent weeks. They included specialized laser maker Cymer, which with its latest round of 130 cuts has eliminated 38 percent of its workforce since …Next Page »

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Sometimes entrepreneurship isn’t the provenance of the young and the quick— and sometimes innovation just won’t go gentle into the night.

Jim Hitchin, for example, is a 66-year-old San Diego entrepreneur who is working to revive biomedical technology acquired in 2004 from the bankruptcy of a Minneapolis, MN, medical device company. Hitchin previously served on the board of Southern California’s Tech Coast Angels, and occasionally worked on projects for venture capital firms. He sold his last company, an infant ventilator maker called Infrasonics, in 1996 for about $66 million.

Now he’s trying to resuscitate SpectraScience (OTCBB: SCIE), a recast medical device startup housed in a faded technology park in San Diego’s famed Sorrento Valley. “I just really like the pioneering part of it,” Hitchin told me during a tour of the 10-employee company. Hitchin estimates SpectraScience spent $55 million in its previous incarnation to develop “optical biopsy” technology that combines a low-power, fiber-optic blue laser with computerized spectroscopy.

Hitchin says he was part of a group that spent about $50,000 to acquire the technology in 2004 out of SpectraScience’s bankruptcy. After moving the company’s equipment from a Minnesota warehouse to San Diego, he’s spent the past five years updating SpectraScience’s technology and rebuilding the business.

The concept underlying the company’s medical device, known as WavSTAT, is fairly simple. The fiber optic laser is incorporated within an endoscope, the flexible medical instrument used to examine the colon and other internal organs. It is used to momentarily illuminate a small area on a polyp or other suspect tissue. The surface layer cells first absorb the laser light and then glow—and that fluorescence can be analyzed to determine if the cells are abnormal, and potentially pre-cancerous.

“Light is just energy,” Hitchin says. “If you pump it in, (the tissue) will give some energy back.” The important thing, he notes, is that healthy cells give off energy in way that looks different than the energy emitted by abnormal cells. The Food and Drug Administration approved …Next Page »

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Propel Fuels, a clean fuel company with operations in Washington and California, announced today it has named Matt Horton chief executive officer. Horton, who has worked on cleantech with the venture funds @Venture and Garage Technology Ventures, succeeds Propel founder Rob Elam, who is staying on as president and director. The company recently moved its headquarters from Seattle to Sacramento, CA.

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While traveling the world over the past dozen years on behalf of the MIT Entrepreneurship Center, I have spoken with hundreds of entrepreneurs in virtually all major business centers of the world, both developed and developing. I would like to see more of our regional entrepreneurs take a big leap by establishing early international relationships and recruiting operations with foreign companies.

While the lack of VC funding and investment capital in general is on every entrepreneur’s mind, being globally competitive with effective sales and sales management is “mission critical.” The importance of sales — one of the most important life lessons — usually comes late in the career of most entrepreneurs.

I’ve seen the benefits of going global. I was a founding member of 3Com Corporation, actually employee No. 8. As the first head of sales, marketing, and planning, I helped 3Com raise its initial venture funding and bring its first three products to market. After a successful launch, I returned to the Boston area where I co-founded several MIT-related startups. These opportunities came after my five years in Beijing under the aegis of Chase Manhattan Bank. I formed a trading advisory company there to assist IBM, General Motors, Gillette, Hughes Aircraft and other pioneering companies enter the China market.

While these large companies knew they needed to grow globally, they also realized they needed outside assistance to build new markets in foreign countries. Many start-up companies may see international markets in their future, but they don’t always hire their initial management team with international sales in mind. Instead, they hire at levels below their growth objectives and then get frustrated when they cannot succeed. Start-ups that aren’t thinking internationally need to think again.

San Diego startups may be at a disadvantage when it comes to having the necessary passion and tenacity for executing a successful global sales strategy. That’s because today’s bright young entrepreneurs may not have been raised to think about the importance of global sales. Have they ever been forced to compete for funding? Where did their sales mentors come from? Most importantly, how does entrepreneurial training in San Diego differ from that offered by our most successful global competitors?

In a startup’s strategic planning phase, it is critical to think globally about the “go to market” strategy, and to identify exactly which markets to enter. If there is an international market for a startup’s product or service, it makes sense to plan an early entry—not only to differentiate their revenue streams, but also to capture market share before their competitors do.

Improving the effectiveness of the sales force in globally ambitious companies, large and small, is consistently cited by business experts as one of the highest priorities. In the current economic climate, every purchase by any prospective customer must be triple-justified at all levels of management. Thus, having the best ROI-based sales approach is essential to shortening the sales cycle across borders and, therefore, to the survival of San Diego’s young companies.

So what are global tech entrepreneurs saying?

—In today’s tough environment, high tech companies must be excellent at sales and customer acquisition or else they will not survive.

—Sincere commitment to solving customer problems is key. If the CEO is not passionately committed to delivering significant value to customers, then either he/she should leave the company, or the employees should find another place to work, because the company will not succeed.

—Loyal long-term customer relationships can provide a key, dependable source of sustainable competitive advantage for growing companies.

Good selling is not an art; it is a science. Effective sales and customer relationship management can be both learned and promulgated throughout the organization. San Diego’s successful regional companies can realize the benefits of global funding, sales, and economic significance by going global. The best way to learn how to do it is from the teachers who have been entrepreneurs themselves. Programs such as the MIT Entrepreneurship Center and Connect’s Springboard program are international and regional assets that excel at teaching sales skills and how to turn concepts related to innovation into profitable business realities.

Editors Note: Ken Morse is scheduled to speak today at the San Diego MIT Enterprise Forum. Details are here.

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