Update at 10:08 a.m. PDT, with additional statistics on IPO market.
U.S. venture-backed companies failed to launch a single initial public offering in the second quarter of 2008, a dire situation not seen since early 2003, according to the Quarterly U.S. Liquidity Report released Tuesday by Dow Jones VentureSource.
That's nada, zero, zilch.
And the mergers and acquisitions market for U.S. venture-backed companies did not fare much better in the second quarter, dropping 42 percent in the number of deals completed compared with the same time last year.
In the second quarter, 56 transactions generated $4.7 billion, compared with 97 deals raising $8.8 billion a year ago. According to the report, the number of deals completed in the second quarter of this year has not been this low for at least 10 years.
Overall, the combined effect of no IPOs and a substantial drop in M&A activity in the second quarter has resulted in a 47 percent drop in money raised through the sale or IPO of a U.S. venture-backed company.
"The broader pullback in the economy is affecting corporate spending and is clearly impacting the M&A market," Jessica Canning, global research director for Dow Jones VentureSource, said in a statement. "Corporations might be out looking for venture-backed companies to acquire, but many are either doing so quietly or choosing to hold off on entering into negotiations."
Since March, for example, 10 companies have yanked their IPO registrations. Currently, 22 companies still are registered to launch an IPO, but are waiting for the markets to improve before going out, Canning said.
This recent IPO drought is the second longest running session since 1992, with no IPOs for 103 days. The longest running session was 145 days that began back in Dec. 18, 2002, and continued through May 12, 2003.
Despite the recent malaise in the market, the amount of liquidity offered up to venture investors has shown some improvements over the past few years. Since 2005, the number of IPOs has steadily risen on an annual comparison basis, while the amount of funds raised via acquisitions has increased on a year-over-year comparison since 2002. And in the past two years, IPOs have historically had a strong showing in the fourth quarter, Canning noted.
Information technology mergers accounted for 73 percent of the number of completed deals in the quarter, with 41 transactions generating $3.3 billion. Time Warner's $850 million acquisition of social-networking site Bebo.com was the largest deal of the quarter. But IT deals overall declined 29 percent from the same time last year.
"We're at the mercy of the market right now," Canning said. "Unfortunately, we're just going to have to wait and see if the liquidity markets recover in the second half of the year."
Parascale said Monday that it raised $11.37 million in Series A venture funding from Charles River Ventures and Menlo Ventures, the latest in a string of cloud computing investments.
The Cupertino, Calif.-based Parascale, which provides storage in a networking "cloud" for digital content providers, said it plans to use the money to develop and market its upcoming Parascale Cloud Storage (PCS). PCS is an application that "aggregates disk storage on multiple standard Linux servers providing one highly scalable storage cloud," according to the company.
Charles River partner Bruce Sachs and Menlo's John Jarve will join the company's board of directors. The company was founded in 2004.
In April, Benchmark Capital invested $4.5 million in RightScale, a software service provider for applications that run on Amazon.com Web services.
Matt Cohler, employee No. 5 at Facebook, will leave the high-flying social network this fall to join venture firm Benchmark Capital as its youngest general partner at 31 years old.
Matt Cohler
(Credit: Dan Farber/CNET News.com)Cohler, whose job description, as written on Facebook, is "ensuring that Zuck (Facebook founder Mark Zuckerberg) never makes it back to Harvard," has been the company's technical adviser, recruiter, and business strategist since 2005, roughly a year after the company started from a dorm room at Harvard University. Cohler said he will remain a special adviser to "Zuck" and the executive team at Facebook even after he moves to Benchmark as an investor in early-stage Internet start-ups. (Facebook does not have an advisory team, so the adviser role will be new to the company.)
Many early employees of companies such as Google and Yahoo are hearing the siren call of venture investing, but this is a first for Facebook. When it comes to executive moves, the social network makes many more headlines for new executive hires. Still, Bryan Schreier, a former Google employee, not too long ago joined Sequoia Capital, an early investor in the search giant. Jeff Weiner, a longtime vice president at Yahoo, recently joined Accel Partners and Greylock Partners as an entrepreneur-in-residence, following former Yahoo colleagues.
Cohler, a graduate of Yale University with a bachelor's of arts, has a healthy track record of picking promising start-ups and entrepreneurs, a talent that Benchmark partner Peter Fenton believes will translate well to venture investing. "He's worked at the center of social media and he's established himself as a go-to person for young entrepreneurs," said Fenton, 35, who's known Cohler for several years.
Cohler met the Facebook founders in 2004 through Peter Thiel, a PayPal co-founder and Facebook's first angel investor. He was introduced to Thiel through Reed Hoffman, the founder of business social network LinkedIn, which this week raised $53 million for a valuation of $1 billion. Cohler joined LinkedIn as a member of its founding team and a general manager.
Menlo Park, Calif.-based Benchmark, which now has nine partners, is known for its early investment in eBay, Handspring, and Red Hat Software. Despite its eye for promising young companies, it does not have an investment in Facebook. (Cohler said that he has not talked with the venture firm about it taking an investment in Facebook.) Benchmark's portfolio includes Zillow.com and OpenTable.
As for his experience at Facebook, Cohler said, "I've loved Facebook, the people, the product. I just knew my long-term trajectory would be to be an early stage investor."
Cohler's Facebook status on Thursday? "I'm excited for LinkedIn!"
Mochi Media, an advertising network for casual game sites, said Wednesday that it closed on a $10 million series B round of funding from Shasta Ventures and Accel Partners.
The San Francisco-based company, which launched three years ago, had previously raised an undisclosed sum from Accel Partners. It plans to use the new funds to develop its fairly new advertising platform MochiAds for game developers. Since the network was launched last October, it has expanded to reach more than 60 million unique visitors per month on multiple gaming sites.
Online gaming is attracting more large investments of late. Earlier this month, Turbine, creator of online games like the Lord of the Rings, closed on $40 million in equity financing from Time Warner and GGV Capital.
In Silicon Valley, like other industry hubs, your next job typically has to do with who you know.
Jeff Weiner, soon to be former executive vice president of Yahoo's Network division, joined the Internet media giant about seven years ago after being recruited by his Hollywood mentor Terry Semel, then-Yahoo's new CEO. Now that Semel is gone, however, it seems that Weiner will make his next move following former Yahoo cohorts into the venture capital business.
Word is that Weiner, a new father, will become an entrepreneur in residence at both Accel Partners and Greylock Partners, according to Kara Swisher at AllThingsD. (Weiner is on paternity leave.) The split role is unusual, say other Silicon Valley entrepreneurs-in-residence, but Weiner has obvious connections to the two venture firms.
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Jeff Weiner, executive vice president of Yahoo's Network division
(Credit: Stephen Shankland/CNET News.com)At Accel, Weiner would join former colleague Andrew Braccia, a nine-year veteran of Yahoo who--before he left in 2007--headed up its search marketplace. Accel partner Jim Breyer was also an early investor in Yahoo; and the firm is heavily invested in consumer Web companies such as Facebook, Glam.com, and Metacafe.
Greylock also has the Yahoo hookup. There, Weiner knows James Slavet, a vice president of Yahoo's search and marketplace group until 2006, when he joined Greylock as a partner. Greylock is another venture firm concentrated on investments in consumer Internet companies, such as Digg, LinkedIn, Facebook, and Evite.
If Weiner splits his time with both venture firms, it would certainly be unconventional, even by the somewhat loosey-goosey profile of most entrepreneurs-in-residence.
Executives will often join a venture firm to start a new company within six to 12 months after signing onto the organization; and the VC might take an investor role in the start-up, or not. The EIR (as they're known) either comes to the venture firm with an idea for a company, or hatches a plan after seeing a parade of technology start-ups present business plans to the firm. If that career path doesn't pan out, the executive might become a partner with the VC, or an adviser to the firm's existing portfolio companies.
At least one executive has been a Benchmark EIR as long as seven years.
Whatever the case, Weiner will take a breather from the internal machinations of Yahoo, even though he's among company expats.
Jim Lanzone, an entrepreneur in residence at Redpoint Ventures after about seven years with Ask.com, knows the drill.
"Being an EIR gives you a chance to step back and see the world through fresh eyes before striking out into something new," he said. "(That's) important after being so internally focused for so long as an operator at a large company."
Flixwagon, a tool for live video broadcasting to the Web via smartphones, is working on a version for the Apple iPhone and Windows Mobile devices.
Tel Aviv, Israel-based Flixwagon is still relatively new. In January, the company launched a free downloadable application for video broadcasting for the Symbian mobile operating system, used largely by Nokia smartphones such as the N95. In February, MTV became its biggest customer, by deploying 23 street reporters with Flixwagon-enabled phones to report on Super Tuesday.
Now, the company is developing support for additional mobile platforms so that it can appeal to an even wider set of customers and media partners. Sarig Reichert, the company's co-founder and vice president of marketing, said that it's working on applications for Java, Windows Mobile, and the iPhone. (Demo here.) That will give Flixwagon entree to tens of millions of phones. In the coming weeks, it also plans to update its technology to include greater controls over the quality of video people can capture and post to the Web.
The company's better-known rival Qik has started offering support of the Windows Mobile operating system by invitation only.
With Flixwagon, people can record a video with the click of a button and have it broadcast to the Web within seconds, depending on the mobile phone connection. On the back-end, Flixwagon trans-codes the video file from the phone to a Flash widget, which at its best output, delivers 320x240 video at 15 frames per second. With a bad connection, it might broadcast video at half the number of frames.
On the downside, the rawness of mobile broadcasting can come off like a Blair Witch Project-style documentary. On the upside, it's incredibly fast and efficient for telling a story, updating friends on your life, or archiving video-worthy moments.
People can choose to upload their clips to a public or private page on Flixwagon, cross post the clip to YouTube, or send an announcement to a Twitter account. Flixwagon followers can also chat with people who are posting videos.
Apart from MTV, Web surfers might stumble on more and more Flixwagon or Qik video installments. Reichert said the company is talking to major media companies about using its technology for citizen journalism, news reporting, or even video streaming for reality TV shows.
"MTV opened up the minds of people in the industry about what you can do about live video broadcasting," Reichert said during an interview Wednesday at the On Hollywood Conference.
The company has raised an angel round of funds from investors in Israel, and it will soon close a round of venture capital investment, according to Reichart. The company makes money through partnership like the one with MTV. It charges service fees for hosting and distributing videos. The company also hopes to sign deals with mobile phone carriers, with which it would share revenue.
Here's a rough cut of a home Flixwagon video, a Flash widget cut and pasted into this blog.
Update at 1:45 p.m.: Qik said that it is has a demo version for the iPhone, too.
News.com's Greg Sandoval contributed to this report.
John Gage, the man who coined the phrase "the network is the computer," has left Sun Microsystems to become a venture capitalist.
Gage, Sun's fifth employee and its former chief researcher, will join the venerable firm Kleiner Perkins Caufield & Byers to help grow its investments in clean technology.
Gage, which left Sun on June 1, said to the San Francisco Chronicle: "Everything we built at Sun sucks power. We've got to make a difference in where power comes from and how it's used."
Gage's departure follows a grim fiscal third quarter for Sun. In May, the server and software company announced a net loss for the three months that ended in March; and it said that it would cut between 1,500 and 2,500 jobs. The company had 34,400 employees at the end of the quarter. Now it has one less high-profile position.
Gage will join former Vice President Al Gore in KPCB's green-tech investing group. He will also rejoin former Sun boss Bill Joy, who's a partner at the venture firm.
Apart from his work at Sun, Gage is known for creating NetDay, a volunteer project established in 1995. It called on high-tech companies to commit resources to schools, libraries, and clinics worldwide so that they could connect to the Internet.
Venture capitalists say the United States still dominates in technology innovation, according to a new survey. But Europe and Asia are quietly excelling in fields like clean tech and software that could eventually pull more investments overseas.
Germany, for example, is becoming a new leader in clean technology, according to a survey of about 400 venture capitalists worldwide released Tuesday by Deloitte and the National Venture Capital Association. The U.S. is still the more attractive investment opportunity in clean tech, but at least 43 percent of respondents recognized Germany for its expertise in solar photovoltaic and other green technologies.
(The study, which was conducted in March, didn't reflect hard investment dollars. Rather, it examined the attitudes of VCs.)
In the field of telecommunications, one-third of venture capitalists recognized Japan as the most attractive place for investment, just behind the United States. In the field of semiconductors, VCs said Taiwan was the leader in manufacturing chips. With regards to software, those surveyed named India as having the top technology, second to the United States, but ahead of United Kingdom and Israel.
More than half of the VCs surveyed said that they are investing overseas, and that number has gone up slightly from last year, according to executives from Deloitte and NVCA.
"While the U.S. isn't losing ground, the globalization of innovation is under way," said Mark Jensen, national managing partner of Deloitte's Venture Capital Services. "The rest of the world is finding out what they're good at."
Flock, a Firefox-based Web browser that plays up social networking online, has raised $15 million in a fourth round of funding led by Fidelity Ventures. The company's previous investors, Bessemer Venture Partners, Catamount Ventures, and Shasta Ventures, also participated in the round.
The deal shows continued faith in the alternative market for Web browsers, beyond the dominant Internet Explorer. Alternative-browser rival Maxthon, for example, has been downloaded more than 140 million times; and it's one of the most popular browsers in China. The Beijing-based company has pulled in investments from Charles River Ventures and Google.
Flock, which was built on Firefox code, caters to people who want to stay on top of services like Twitter, MySpace, Facebook, and Flickr with features that make it easier to broadcast messages to your network. The Redwood City, Calif.-based Flock did not say how many downloads it has to date, but the company said its user base has risen more than 250 percent since January.
The company plans to use the funds to expand its research and development, marketing, and global expansion efforts. To date, the company has raised an estimated $30 million.
Clearspring Technologies, a technology platform for syndicating and tracking widgets, has raised $18 million in a third round of funding from New Enterprise Associates and Novak Biddle Venture Partners, among others.
The Virginia-based company, which was founded in 2004, has previously brought in an estimated $18 million in private financing. Harry Weller, a partner at NEA, will join Clearspring's board of directors, whose members including AOL co-founder Steve Case.
The company supplies technology to the likes of NBC Universal, Newsweek, and Maxim.com to serve, track, and distribute entertainment or news applications across the Web. It distributes and analyzes the traffic of about 4 billion widgets monthly, according to the compnay.
Clearspring said it will use the money to expand its network of advertisers and publishers, and grow into international markets.
