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Brier Dudley's Blog

Brier Dudley offers a critical look at technology and business issues affecting the Northwest.

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November 7, 2007 4:56 PM

Naveen Jain: Venture capitalists are "the antichrist"

Posted by Brier Dudley

Naveen Jain was on a roll Tuesday night at The Indus Entrepreneurs annual funding forum, needling venture capitalists at every turn.

More than 100 startup types, investors and big-company employees attended the event, sponsored by the Harvard and Wharton business schools. Companies pitched their businesses to a panel that awarded prizes of cash and services.

Everyone at TiE knows Jain, who left Microsoft to start and run InfoSpace during its turbulent years before founding Intellius in 2003.

So Jain had some fun when he was introduced by moderator Todd Dean of the Keiretsu Forum.

Jain said he thanks God "for keeping me away from VCs," drawing a roar from the capacity crowd at the Courtyard by Marriott.

Jain turned to the audience, flashed a big smile and kept on going.

"They are probably the antichrist of entrepreneurship,'' he said, adding that "they like early stage investing because they can take the most of it."

He also suggested that TiE consider having a "No-funding forum for entrepreneurs" and later said that "anybody who takes $120 million -- they're fat pigs and they deserve to be slaughtered."

A colorful caution, but remember that Jain made buckets at Microsoft and was worth $8 billion before InfoSpace tumbled in the dot-com crash.

Jain was sitting across from panelists Mark Ashida, managing director of OVP Venture Partners; Greg Gottesman, managing director of Madrona Venture Group; and Andy Dale, managing partner of Buerk Dale Victor.

Next to Jain was Raghav Kher, who also left Microsoft to start successful companies -- Rendition Networks and Seventymm, a Netflix-like service in India.

Kher gamely came to the defense of venture financing, saying it made sense for him.

Finally, the venture capitalists responded, with Gottesman taking the lead.

Gottesman objected to the antichrist reference, but said he agreed with some of what Jain was saying. Venture capital isn't for everyone, he explained, especially if an entrepreneur can go it alone and doesn't need cash flow.

"This is not something you go into lightly,'' he said.

Venture capital should be more for companies that need to really grow and pursue big markets, he said:

"Most companies shouldn't take venture capital," he said. "Our capital is expensive. It's preferred stock. We get it out first."

Gottesman's final advice: people should ask around for advice, since a lot of TiE members had worked with Madrona and other venture firms, but, "Please, don't call Naveen."

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November 7, 2007 1:03 PM

Selberg scoops: Microsoft, UW departures to Google

Posted by Brier Dudley

I need to pay more attention to the blog of Erik Selberg, who left Microsoft's search team in September to join Amazon.com.

On Tuesday, Selberg wrote about how a friend on Microsoft's search team was escorted out of the building after deciding to join Google's Kirkland office. That led him to question why he received better treatment:

Other colleagues I knew from Microsoft that went to Google were shown the same treatment. So why was I shown the love and not my friend? Well, as near as I can tell, Microsoft doesn't want someone who has decided to leave for Google around so that other employees can ask all the obvious questions and think about going to Google themselves. Google is clearly the competition, and while it's OK to leave Microsoft and do something random (like work for Amazon), leaving to compete with Microsoft is an unforgivable offense, apparently up there with violating company policies.

Last Friday, he shared a chat he had with Yahoo's international search boss about why the company opted to locate in Bellevue rather than Seattle, and how the local team with work with Yahoo's mothership:

Microsoft isn't moving anytime soon, and Google opened up an office in Kirkland, also on the east side. So why not offer something different, like a nicer commute or better digs? He didn't know.

The second question also got a non-answer. He wasn't sure who else was going to be up in Seattle, so apart from having an office with a bunch of Yahoo! engineers, it wasn't clear that there'd be any synergy with the other teams. Seems... well, broken to me. Hey Yahoo!, is this really what's happening?

Selberg's Friday post also reported that Craig Chambers left the UW computer science department to lead Google's infrastructure engineering team in Fremont.

Chambers spent a sabbatical with Google last year and has been working there since the end of the summer, according to Ed Lazowska.

Two weeks ago Chambers was joined by Brian Bershad, another CSE professor, further boosting the search company's UW connections.

Is this some sort of payback from Larry and Sergey, who hatched Google while studying at the Gates Computer Science Building at Stanford?

Until mid-year, Bershad was also chief executive of Illumita, a virtualization company founded by a group of UW profs.

Selberg -- also a UW alum -- noted that Amazon is another option for big-company software jobs in Seattle, and it's "located in the heart of the I-District with much better locale and food!"

I'm looking forward to reading what he'll say about South Lake Union.

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November 7, 2007 10:39 AM

Protelus dubbed most promising startup, best pitch

Posted by Brier Dudley

Protelus, a Bellevue data-mining company you've probably never heard of, was deemed the most promising startup at a funding forum held Tuesday night by The Indus Entrepreneurs' Seattle chapter and the Harvard and Wharton schools of business.

The firm also won the event's "best pitch" award for the five-minute spiel by its president, Craig Chelius, who earlier co-founded Primus Knowledge Solutions.

Protelus beat out five other companies that presented to a panel of venture capitalists and startup veterans.

Protelus helps mortgage companies better monetize their customer data, charging them to capture and clean data.

Sales are expected to double this year to $1 million and the company expects to reach $68.4 million by 2010, if it's not already acquired by a big financial services company.

Meanwhile, it's looking for funding, beyond the $2,500 in prize money it took home last night, to expand sales and marketing.

A third prize, for "most innovative" company, went to SpringStar, a Woodinville company developing non-toxic pest control products.

SpringStar already sells such products as yellow jacket traps through Molbak's, Fred Meyer and other retailers, but panelists were intrigued by new technology that founder Michael Banfield called "bio-mimicry" because it uses "natural biological communication to repel and attract pests."

Dubbed the SpringStar Sonic System, the product is based on research into pheremones and "songs" bugs use to communicate. Banfield said it's "the iPod of pest control."

Banfield is raising $900,000 in series A funding that values the company at $2.7 million. He's expecting sales to rise from $1. 4 million to $20 million a year after the sonic system gets going, and predicts SingStar will be acquired by one of the big industry players.

Also presenting were:

-- JDL Digital Systems, a Bellevue company that has developed software for video surveillance systems it provides to government and businesses, particularly casinos. Chief Executive Victor Huang said the industry is fragmented and JDL's solutions are far easier to manage. He's expecting 50 casino deals next year to boost sales beyond its current $2 million.

Huang is trying to raise $1.5 million -- valuing the company at $6 million -- to invest in sales and marketing.

-- TeachStreet is a Seattle company aiming to connect people with instructors, replacing bulletin boards, catalogs and Craigslist ads people generally use now.

It sounds to me like a digital version of lifelong learning programs such as the UW's Experimental College, but TeachStreet has bigger amibitions. It's using vendors in India and the Philippines to scour the Internet and build directories of teachers in cities across the country.

In Seattle, the six-person company is building a Web site where instructors can post profiles that include recommendations from former students.

TeachStreet's chief executive, Dave Schappell, was formerly a director at Amazon.com, where he helped develop the marketplace platform. Its chief technology officer, Fred Sadaghiani, previously worked at Amazon and Zillow.

Schappell said TeachStreet has raised $550,000 so far, but he's looking for $1.75 million, which would give investors 25 percent of the company that he compared to eBay and Yelp.

-- CondoCompare is a Seattle company building a site for searching and listing condomium listings. Chief Executive Casey Sullivan plans to make money primarily from referral fees paid by real estate agents, but also from contextual ads.

Sullivan said the site is working with brokerages -- so far in Washington, Oregon and California -- so it can obtain MLS data feeds. Within three years it hopes to reach 150 markets, but expansion costs the company $20,000 to $50,000 per market so he's looking for funding.

-- Artemisia BioMedical is a Newcastle-based company developing anti-cancer drugs based on old malaria drugs, drawing on research at the University of Washington and Johns Hopkins University.

The company is working with artemisinin, a malaria drug that researchers in 1993 found can kill cancer cells. Targeted compounds based on the drug were developed in 2003 and 2004, and the company was founded in 2006.

It's now seeking $2 million for further development, an investment that would put the valuation of the company at $10 million, according to Senior Vice President Dilip Worah, formerly chief scientific officer at Nastech Pharmaceuticals. Artemisia's chief executive, Michael Kuran, co-founded Fulcrum Ventures and earlier was a ZymoGenetics manager.

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Gadgets and games | Fun stuff I've written about lately includes Apple's iPhone, Hewlett-Packard's HDX laptop and Microsoft's Halo3. Also on the radar are new digital video boxes such as the Tivo HD and the Vudu.