Rustic Canyon

Monday, May 5, 2008

Southern California: The New Detroit?
Story by Tom Taulli

Recently, the CEO of GM (NYSE: GM), Rick Wagoner, extolled the importance of electric cars. It does seem like a no-brainer, especially in light of environmental concerns and the soaring price of crude. In fact, the mega car company is exploring many alternatives, such as fuel cells, ethanol, hybrids and so on.

Of course, it’s all good news for a variety of companies in southern California, which are developing next generation car technologies. “Southern California is the home to a myriad of design studios for all the major car companies,” said Andre Peschong, who is a principal at Bridgewater Capital. “There is a talent pool of engineers, CAD design specialists and let’s face it, a car culture.”

Capital Comes to Socal

So, it should be no surprise that there is an influx of capital into the region, looking for big returns.

For example, Phoenix MC – which is based in Ontario – raised funding in March (the amount was not disclosed). The investors included Al Yousuf LLC, a Dubai-based diversified commercial company and The AES Corporation (NYSE: AES), which is a major power company.

Since 2001, Phoenix has been developing battery-electric, freeway-speed vehicles. And the cars are expected to hit the road next year.

“We have the advantages of being nimble and quick,” said Daniel Elliott, the CEO of Phoenix. “Although, we went with strategic investors because of the added value they can bring as well as their long-term perspective.”

Some of the other alternative vehicle makers include: Miles Electrical Vehicles (Santa Monica), Venture Vehicles (Los Angeles) and Aptera Motors (Carlsbad).

Cutting-Edge Innovations

Socal also has a myriad of auto technology providers. Just look at Transonic Combustion, which is based in Camarillo. Over the years, the company has been working hard to develop an advanced fuel-injection system so as to greatly increase fuel efficiency. The platform can operate on gasoline, diesel and bio-renewables.

“We are looking for leapfrogging technologies not incremental steps,” said Ford Tamer, an operating partner at Khosla Ventures, which recently invested in Transonic. “We think there are opportunities in revamping the old ways of doing things.”

Another interesting company is Fallbrook Technologies, which is based in San Diego. In the research mode, the company is building an advanced transmission systems. In fact, the system has more than 200 patents and pending applications worldwide.

The Big Pay Off

Despite all the activity in the alternative auto space, there are still some concerns. After all, many of the technologies are experimental. Moreover, it will take time for them to get traction.

But the long-term certainly holds lots of promise. “We are in the early days of the market,” said John Babcock, who is a venture capitalist at Rustic Canyon. “Even if oil drops, there will still be opportunity because of the regulatory pressure. We are looking at very large markets.”

(Photo credit: Benjamin F. Kuo)

posted on Monday, May 5, 2008

http://www.socaltech.com/southern_california_the_new_detroit/s-0015119.html

By JAMES FLANIGAN

Published: April 17, 2008

WITH all the grim earnings news from corporations and banks lately, not to mention the continuing credit squeeze and widespread talk of recession, it would seem that most small companies, too, would be having a hard time finding financing.

Byron Roth, chairman of Roth Capital Partners, raises money for small companies seeking to expand.
But that was not the case at a recent conference in Southern California, where 1,000 investment professionals came from all parts of the United States to hear and talk to 330 aspiring companies — 50 of them from China. Many of the companies sought by investors were developing environmental, clean energy, cellphone, water treatment and biomedical technologies.

The economic gloom actually encouraged the crowd, said Byron Roth, chairman of Roth Capital Partners, the Newport Beach, Calif., investment bank that was the host of the conference. These days, Mr. Roth said, “established large companies may not offer earnings growth but we can show investment managers fast-growing small companies that few people in broader markets know about.”

In addition, he said, investors with capital have less competition for choice properties “because large investment banks and hedge funds are affected by the financial crisis and forced to hold back.” Most companies at the Roth conference, in February, are publicly traded on Nasdaq and related over-the-counter markets.

“What I like about these conferences is that I find small, growing companies before everybody else does,” said Joseph C. McNay, who attended the Roth conference. Mr. McNay is chief investment officer and managing principal of Essex Investment Management, a firm based in Boston that handles $2.4 billion in investments for institutional and private family funds.

The crowds and enthusiasm were similar at the Montgomery & Company Technology Conference in March in Santa Monica, Calif., which attracted more than 500 investors and 160 companies. Most companies at the Montgomery conference were privately held and worked mainly in the fields of social networking games and communications services for mobile communications devices.

“The sentiment was very optimistic,” said James W. Montgomery, the chairman of the firm, which has been raising money for small companies in media, communications and health care for 20 years. “There is plenty of capital around because venture capital hasn’t been in a bubble mode in recent years like real estate and debt markets.”

It is also a good time for mobile phone companies “because the infrastructure of the Internet has been built out,” Mr. Montgomery added. “So companies selling entertainment and services for phones can innovate on the Internet.”

To be sure, financing for small companies is less generous and flamboyant than it was a few years ago, said Kenneth Kalb, a serial entrepreneur who has just started Analog Analytics, a company that he presented at the Montgomery conference. In recent years, the venture investment climate became overheated, Mr. Kalb said.

“Private equity firms and venture capitalists would pour money into Internet solutions, investing more than $100 million and looking to earn 5 to 10 times their money in three to five years,” he said. “Now, it has returned to a business with more reasonable valuations. Small amounts of capital are invested but capable of earning a return in two to three years.”

Fortunately, Internet services do not need a lot of capital to get going, he added. “My investor group and I started the company for $1 million,” said Mr. Kalb, who has founded and led two other companies in the last decade, selling the latest one last year. Analog Analytics uses database software to pinpoint for advertisers specifically who is seeing and reacting to their ads in newspapers, television and billboards.

Thomas Unterman, managing partner of Rustic Canyon Partners, a venture capital investment firm, agrees that the days are “long gone when investors looked for returns of 10 times their money in three years.” But there are hotly favored fields today. “Anything clean or green technology, like solar energy, will attract funding immediately,” Mr. Unterman said.

Twenty-five “green track” companies presented at the Roth conference, including Basin Water Inc., a company that converts contaminated groundwater to drinking water and maintains water systems for municipalities and private companies. Based in Rancho Cucamonga, Calif., the company, which had $18 million in revenue last year, is expanding operations across the United States, said Michael Stark, president and chief executive. “I presented at the Roth conference to keep up awareness of our company in the investment community, not to raise capital,” Mr. Stark said.

California has no monopoly on entrepreneurial companies, Mr. McNay of Essex Investment said. “These days, good small companies crop up in Boston and Chicago, Austin, Tex., and many other places,” he said. “But California does have more of them.”

Mr. McNay particularly liked the array of Chinese companies that Roth Capital brought to the conference. Those companies included China BAK Battery, a firm from Shenzhen, China, that makes lithium-ion batteries, and Sutor Technology Group, a Changshu company that makes steel finishing products for use in electrical appliances.

“Today’s China companies are just like the small entrepreneurial outfits with a lot of promise that we helped bring along in the early 1990s,” Mr. Roth said.

He reported that at least 10 acquisition or special financing transactions were initiated during the four-day conference. And possibly more long-term business was initiated because several “blank check” special purpose acquisition companies attended, Mr. Roth said.

Those companies, known as SPACs, raise money for the purpose of acquiring and then operating an existing company. One example is the Heckmann Corporation of Palm Desert, Calif., which was formed last November with $450 million of capital raised by two underwriters, Credit Suisse and Roth Capital.

Richard Heckmann is chief executive of the new company, which will spend $1.7 million organizing itself and researching which companies to acquire and operate. His board includes former Vice President Dan Quayle; Alfred E. Osborne Jr., senior associate dean at the Anderson School of Management at the University of California, Los Angeles; and Lou Holtz, a former football coach and television analyst.

Mr. Heckmann founded, built up and sold four companies over the last four decades, including U.S. Filter, a water treatment firm now owned by Siemens, and K2, a sporting goods company he sold last year to the Jarden Corporation. “I saw this bubble bursting years ago,” Mr. Heckmann said in an interview. “Private equity funds, swelled by debt, were buying companies in sporting goods and every other field, bidding up prices for no good reason.”

But now, in the downturn, he sees a new picture. “Companies can’t raise debt so there are opportunities for equity investment,” Mr. Heckmann said.

Stop…Hammertime

So Dancejam.com recently launched and I must say i am impressed. If you are just hearing about Dancejam in this post let me catch you up a bit; Dancejam is MC Hammer’s (yes that MC Hammer) new web initiative. In short it is a video sharing site for dancers. There has been a fair amount of buzz about this site over the past few months, mostly just individuals like my trying to figure out exactly what the site is about. The initial splash screen that was up had a video of Lil Mama endorsing the site along with snippets of some user videos from the sites private Beta release, to the point but still somewhat vague and still left me wondering what to really expect. 

With Dancejam being fully launched now you can go over and see for yourself how the site is categorized. The IA (Information Architecture) on the site is quite intuitive with the content being structured and categorized by dances (breakdance, chicken noodle soup, locking, ect), battles (like Josh vs. Tyblack), people, and videos. I must say the battles are the most intriguing and engaging for me. With the latest dances spreading like a bad rash these days I don’t doubt this site will become popular among teenagers and true dancers. The only thing missing thus far on this site is the very thing that is terribly crucial in my opinion: the ability to embed video from the site. Yes they have sharing features in the form of a unique URL and also using Facebook but that is the extent, atleast for now. Overall it is a good look on Hammer’s part and a smooth way to parlay his status as a dancer into a UGV(user generated video)-social network online.

MC Hammer And Friends Unveil Dance-Themed Social Network



Dancejam DanceJam, the brainchild of MC Hammer and a venture capitalist partner, promises a new place for dancers and dance fans to upload footage of their best moves and learn new steps from experts including Hammer himself.

Hammer (the "MC" is optional now) impressed me with his explanation of how the site would work back in November.  People are already uploading videos, and several battles have broken out between dancers using the site vying to prove that their moves are superior to those of their opponent. 

For more on DanceJam, check out our exclusive preview of the service (let it never be said that I have not chilled with MC Hammer).

You Got Served… Digitally

We discussed DanceJam, MC Hammer’s new online dance community, in episode 30 of our podcast.

 Well, the beta version of DanceJam is officially open, and users can start publishing videos of their killer moves.

 DanceJam, which self-promotes as the “largest dance floor on the planet,” allows users to seek out and learn a specific dance, share their own videos and even engage in online dance battles. Now you can make a fool of yourself to a much wider audience than just your parakeet and life-sized cutout of John Wayne.

 While DanceJam is certainly aimed at the hip-hop dance crowd, this seems to be the first major dance community geared toward learning and sharing. This is another example of a site and concept to which arts organizations should be paying close attention.

 Yes, DanceJam cost millions of dollars to design and develop, but there are affordable ways for arts organizations to collaborate, share and educate. For instance, a dance organization could offer tap lessons as an online series through YouTube and link to the videos from their Web site. Or a literary organization could offer online poetry slams and ask visitors to pick the winners, who could then be featured artists in a spotlight section of the organization’s Web site. Just some thoughts…

 The point is that arts organizations should continually be reviewing the online practices of for-profit ventures and creatively copying whenever possible.

Can Touch This: DanceJam Opens To The Public

YouTube for dance videos DanceJam has launched into open beta today after several months of private testing.DanceJam offers dance battles where users dance off against each other, with viewers voting on the best video. DanceJam also offers general dance videos, including locally uploaded content and videos from external sites such YouTube.

DanceJam was founded by M.C. Hammer, and Geoffrey Arone and Anthony Young from Flock. The company has taken $4.5 million in funding over two rounds, with investors including Ron Conway, Alex Algard, Michael Tanne, Geoff Ralston, Alex Welch, Ariel Poler, Rustic Canyon Partners, Softbank Capital and Michael Arrington.

You can see an example of a “Dance Jam” here.

Disclosure: Michael (as noted in the post) is an investor, I’m not.

Duncan Riley

Wagner James Au, Wednesday, February 13, 2008 at 6:00 AM PT

Last year, Om wondered aloud what Lee Crawford at the Venrock and Rustic Canyon Partners-backed startup TwoFish was up to. Well now we finally know: Twofish Elements, billed as a “turnkey solution” for companies with online worlds and game networks that want someone to handle in-game currency, micro-transactions and other features that comprise a virtual economy.

 While potentially lucrative as a revenue stream, these systems are highly volatile and difficult to control, leading to strange gamer phenomena like gold farming or panicked runs on virtual banks. With that in mind, I asked Crawford, Twofish’s founder and CEO and a veteran of both game and financial software development, to provide some more background on how Elements will work.

How is your economics system created, and how do you protect against inflation, currency devaluation, etc?

Most of the policy decisions about how an economy is structured will be decided by our development partners. Twofish Elements gives them the tools they need to intelligently make those decisions…and we put it all in a format that is easy to understand and even simpler to administrate.

Think about our U.S. economy — there are many different schools of thought on the best way to manage its health, and we expect that game developers will also take different approaches to managing their worlds. However, by using Twofish Elements, our partners will know immediately if something is changing, and they’ll have real-time access to the dials that they can tune to bring things back into balance. And because this type of analysis is so new to many of our partners, we’ll be helping and advising along the way.

What online games is this system being used in?

The first full implementation of the platform is a first-party, proof-of-concept auto racing title. We are also in the early stages of integration with several third-party partners, from large publishers to independent developers. Twofish Elements is completely scalable to the differing needs of our different partners.

Does it have solutions to account for gold farming, RMT, and other emergent player behaviors?

These are issues we take very seriously. We actually believe that many emergent player behaviors arise as a result of poorly executed economies. When players can’t do something in-game that they can do in the real world, they find alternative solutions to work around the game. By making economies more realistic, we make games more engaging and flexible for a broader set of users to enjoy, and we expect that this will help curb many of those problems from the start. However, should an emergent behavior arise, our partners will know about it long before it becomes a problem, and will have the tools to be proactive about managing their reaction.

Read article at GigaOM

SAN JOSE, CA – January 28, 2008 – Capella Intelligent Subsystems, the leading provider of Wavelength Selective Switches (WSS) for use in reconfigurable optical add/drop multiplexers (ROADM) applications, today announced it closed $15 million in equity financing. The financing was led by the Lucas Venture Group, and existing investors Levensohn Venture Partners, Rustic Canyon Partners, and Formative Ventures participated fully.

 The $15 million in new capital will be used to expand and strengthen Capella’s presence in the ROADM market, which is expected to grow to $2.8 billion over the next 4 years, according to the most recent Needham investment analysis report. New product offerings and operational improvements are Capella’s key focus in the coming months, as the company expands to meet growing market demand.

 “We are in the midst of global network transformation driven by consumer services such as video, music and social networking. Capella is well-positioned as a key enabler in broadband IP content distribution. As companies upgrade their networks to support IP-based consumer services, Capella’s technology will be critical,” said Larry Schwerin, president and chief executive officer of Capella. “Networks need to deliver quality broadband services at a price consumers will pay, and Capella provides the industry-leading solution to enable their customers to build cost effective, flexible networks.”

 “We have been pleased with the progress of Capella, and this financing reflects the strength of its market position and technology platform. We have great confidence in the management team and technology, and look forward to seeing how Capella positively impacts this IP evolution,” remarked Michael Kim, partner at Rustic Canyon Partners.

 “Capella is also utilizing its strong intellectual property portfolio to expand its product line to meet growing market needs across a broader range of network applications. Our best-of-breed core product capabilities can be applied flexibly and cost-effectively to serve evolving IP network requirements”, said Kip Sheeline, Managing Partner of Levensohn Venture Partners.

 About Capella Intelligent Subsystems

Capella is the industry leader of wavelength selective switch (WSS) technology for use in reconfigurable optical add/drop multiplexers (ROADM) and optical cross connect (OXC) applications. Capella's patented WavePath® products provide the best performing WSS on the market offering dynamic, remote reconfigurability with fully integrated optical channel monitoring (OCM) for simplifying network operations and planning, while dramatically reducing costs. Capella's products are used in both metro and long haul applications. Founded in 2000, Capella is a privately-held company located in San Jose, California. For more information, go to www.capellainc.com.

 Contact:

 Capella Intelligent Subsystems

Kenneth J. Falta

VP of Sales and Marketing

Tel: +1-408-360-4241

kfalta@capellainc.com

www.capellainc.com


Stepping Out Communications

Lisa Copass

Tel: +1-925-253-8445

lisa@steppingoutcomm.com

Rap artist MC Hammer, who declared bankruptcy in 1996 with almost $14 million in debt, is looking to build a new fortune.

The rapper is known for bringing rap music to mainstream audiences in the 1980s and early '90s through his flamboyant dance moves. He's back in the public eye with a company he co-founded called A Large Corporation Inc. The Menlo Park, Calif., company is developing a Web site called DanceJam.com that soon will allow people to engage in virtual dance competitions by posting videos of themselves dancing. It also will offer instruction in the newest dance moves.

DanceJam plans to generate revenue from advertisements as well as merchandising. There is also the possibility of selling music or partnering to sell music on the site, says Mark Menell, partner at Rustic Canyon Partners, an investment firm that led a $1 million round of founding for DanceJam.