Rustic Canyon

By Scott Denne
3/31/2009

In what may be a solid return for its investors, disk drive maker SiliconSystems Inc. has been sold to Western Digital Corp. for $65 million in cash, giving the hard disk giant its first solid-state product.

SiliconSystems had raised $14 million in venture capital from investors such as Miramar Venture Partners, Rustic Canyon Partners and Shepherd Ventures. It last raised capital in August 2006, with a $2 million Series C round from Samsung Ventures, according to VentureWire records and filings with the Securities and Exchange Commission.

Saints Capital also holds a stake in the company through a recent deal in which the secondary firm bought 20% of Rustic Canyon's position in eight companies from its second fund, including SiliconSystems.

SiliconSystems, founded in 2003, made flash memory-based disks that are used for embedded storage in industrial, military, aerospace and communications products.

The company targeted those markets because it saw larger disk drive companies putting more effort into commodity disk markets, such as corporate data centers and personal computers, said Bob Holmen, a managing director of Miramar Venture Partners, which led the company's Series A round in 2004. "Companies like SanDisk were moving away from the industrial side of the market, and that left SiliconSystems with a nice hole" to fill, he said.

"The key factors for us [in the decision to buy SiliconSystems] was a success in an ongoing market, with customers that are new to us," said Bob Blair, a spokesman for Western Digital. Aliso Viejo, Calif.-based SiliconSystems has been profitable since 2005 and had revenue of $47 million in 2008, he said.

SiliconSystems explored raising more capital to continue to grow independently but concluded that it would need to begin building its own application-specific chips to get to the next level of performance, something that would have taken an additional $25 million and greatly changed the amount of risk involved in the company, said John Babcock, a partner with Rustic Canyon.

Both Holmen and Babcock said they were very happy with the outcome, though neither would provide specific multiples.

In addition to the embedded storage market, SiliconSystems' technology and engineering staff will "enable us to jumpstart our own efforts in solid-state storage," Blair said, adding that Western Digital had plans to eventually bring solid-state products to the consumer and corporate computing markets that it currently serves with hard disk drives.

Flash memory has drifted into the consumer space over the last few years, beginning with devices such as MP3 players and cameras and more recently laptop and desktop hard drives.

There has also been a lot of recent talk - but few products - around bringing flash disks to data centers, since companies frequently have to over-provision hard disks to keep up with faster processor speeds, a problem that flash, with faster read and write speeds, could solve.

On Monday, Pliant Technology Inc. announced a $15 million Series C round to bring enterprise flash disks into production. Also, two of Western Digital's biggest competitors - Hitachi Global Storage Technologies and Seagate Technology - have announced their intention to enter this space.

Integration of the two companies has already begun. Western Digital will keep all of SiliconSystems' approximately 100 employees. The company will become Western Digital's solid-state storage business unit.

http://www.wdc.com
http://www.siliconsystems.com

In a weeklong blitz for his ambitious, but somewhat beleaguered budget, President Obama today is highlighting "clean energy" proposals.
In advance of a meeting with entrepreneurs and research leaders, the White House released a "fact sheet" saying that the $787 billion stimulus bill includes $39 billion in energy investments at the Department of Energy and $20 billion in tax incentives for clean energy.
Obama's $3.6 trillion spending blueprint, which is under criticism from both Republicans and some Democrats because of new, higher deficit projections, includes almost $75 billion over 10 years to make the research and experimentation tax credit permanent.
The president argues that alternative energy will create jobs, wean the country from foreign oil, and help make progress on global warming.
Obama also promoted his budget in his weekly Internet and radio address on Saturday and in an interview on "60 Minutes" on Sunday, and plans to do so again in a primetime news conference on Tuesday.
He also had his grassroots army knock on doors over the weekend to build support for his budget.
"It’s an economic blueprint for our future – a vision of America where growth is not based on real estate bubbles or overleveraged banks, but on a firm foundation of investments in energy, education, and healthcare that will lead to a real and lasting prosperity," he said in his weekly address. "These investments are not a wish list of priorities that I picked out of thin air – they are a central part of a comprehensive strategy to grow this economy by attacking the very problems that have dragged it down for too long: the high cost of health care and our dependence on foreign oil; our education deficit and our fiscal deficit."
He said renewable energy is one of four core principles he will insist on as Congress debates and rewrites his proposal.
"First, it must reduce our dependence on dangerous foreign oil and finally put this nation on a path to a clean, renewable energy future. There is no longer a doubt that the jobs and industries of tomorrow will involve harnessing renewable sources of energy. The only question is whether America will lead that future."
The fact sheet is below:
FACT SHEET: INVESTING IN OUR CLEAN ENERGY FUTURE

Today, President Obama will meet with clean energy entrepreneurs and leaders of the research community to discuss his strategy for building a clean energy economy and creating the industries and jobs of the future.

The American Reinvestment Recovery Act and his FY10 budget dramatically increase investment in cutting-edge research, the development and deployment of clean energy technologies, and incentives for private sector R&D. These investments will establish the foundation for America’s future economic prosperity, reduce our dependence on foreign oil, and help combat climate change.

The ARRA includes $39 billion in energy investments at the Department of Energy and $20 billion in tax incentives for clean energy, including:

The creation of an advanced research agency for energy, modeled after the Defense Advanced Research Projects Agency which developed the Internet

Support for Energy Frontier Research Centers, which could lead to breakthroughs in energy storage, super-efficient engines, and solar cells as cheap as paint

Supporting U.S. manufacturing of advanced batteries needed for plug-in hybrids, renewable energy backup, and other applications

$1.2 billon for research infrastructure for the Department of Energy’s national labs, which is being announced by Secretary of Energy Steven Chu today at Brookhaven National Laboratory.

The President’s 10-year budget also proposes almost $75 billion to make the Research and Experimentation Tax Credit permanent, stimulating private-sector investment in R&D and keeping the U.S. economy at the cutting-edge of 21st century technologies:

Studies have shown that every dollar of tax benefit stimulates as much as an additional dollar of private R&D spending in the short run and two dollars in the long run. Every $1 of R & D adds $2 of benefit to our economy and society as a whole.

Two-thirds of benefits of the credit are attributable to salaries of U.S. workers performing U.S.-based research, and the credit stimulates R&D spending by more than 11,000 small, medium and large firms.

The credit has been extended 13 times with some extensions lasting just 6 months, and has also been allowed to lapse for almost a year - undermining its effectiveness because companies can't count on it.

Several of the technologies in the program today will be on display, highlighting the importance of R&D investment in building a clean energy economy, including:

Orion Energy “Apollo Light Pipe”: The Apollo Light Pipe collects and focuses sunlight, bringing natural light indoors without consuming electricity and replacing traditional lighting for large portions of the day. Coca-Cola and Sysco have installed this system, saving enough energy to power over 500 homes for a year.

Solyndra Solar Panel: Solyndra is the first recipient of the DOE Loan Guarantee recovery program, announced last week. Their solar panel is a unique cylindrical design that maximizes direct sunlight and absorption.

The program will highlight success stories from R&D investments in the lab to job creation. Paul Holland, the Vice Chairman of the Board and Lead Investor for Serious Materials, will introduce the President and share the story of Serious Materials, the leading energy-saving building materials company in the US.

Serious Materials has 4 plants in California, Colorado, Pennsylvania, and plans to reopen the old Republic Windows plant in Chicago this Spring.

Earlier this month, Serious Materials re-opened a previously shuttered plant in Pennsylvania, and is hiring back over 100 union workers in the next couple of months.

Serious Materials’ products exceed current Energy Star standards by up to 400 percent and can reduce heating and cooling energy costs by up to 50%. 5% of US energy use is lapsed through inefficient window glass.

President Obama made remarks on investments in clean energy and new technology included in the budget from the Old Executive Office Building. Speaking before the president were Massachusetts Institute of Technology President Susan Hockfield, and Serious Materials Board Member Paul Holland.

Serious Materials re-opens former Kensington Windows factory and re-hires ex-employees to manufacture energy-efficient, super-insulating SeriousWindows - helping to create green jobs for U.S.

Last December workers at Republic Windows launched a sit-in when their employer, citing the loss of line of credit, shut down their factory without notice. The workers, with the backing of their union, eventually got the back pay they were owed, but not the jobs. A few days later Robin Roy, a friend of mine whose wife is Cathy Zoi, the Director of Al Gore's Alliance for Climate Protection, came to see me about his new job -- with a company called Serious Materials. Robin was excited about Serious Materials' breakthrough line of super-insulated but very low-cost windows.

Robin showed me how, at his company's price point, it's now cost-efficient in areas with very hot or cold climates to replace existing windows with new ones with insulation values up to R 11. I asked him the routine green-tech question: "You guys are a small company, how will you get to scale?" He gave me a very un-Silicon Valley answer: "We are buying up window manufacturers who are going out of business." So I told him about Republic Windows, and I told him about its union.

Friday morning I picked up the paper -- and discovered to my joy that, thanks to the confidence provided by the Obama stimulus package and the president's commitment to green energy, Serious Materials had reached out to the workers at Republic Windows, worked with their union, and finally bought their factory from the bankruptcy court. They're now getting ready to reopen.

I asked Robin what role the stimulus package played in this happy outcome. He emailed me back, after telling me how fabulous the workers had been in the whole process: "Effective implementation of ARRA's [the stimulus package] energy-efficiency measures will allow us to expand our planned operations and hire up more rapidly than would be possible without it. This will bring jobs not just at the factory, but also in installation, and upstream supplies." Meanwhile, the non-union plant that the previous owners had opened after shutting down the Chicago plant went under -- sadly for its workers. But Serious Windows and Republic/Chicago are a lesson in how the combination of effective government action and innovative green technology can generate new jobs -- and save homeowners on their utility bills while cooling the climate.

As Malcolm Gladwell points out in his new book, Outliers, there is an "ecology of success". Three years ago, the Sierra Club committed itself to figuring out how a grassroots organization could do more to implement solutions to the critical problems posed by the climate crisis. What we're learning is that the concept of an ecology applies to social solutions as well as to individual successes.

By MICHAEL TARM
Associated Press Writer
The Associated Press

updated 1:04 p.m. PT, Thurs., Feb. 26, 2009

CHICAGO - The factory where laid-off workers staged a highly publicized sit-in that garnered national attention last year was sold to a California company that hopes to rehire them and open in about a month, the workers' union and the new owner said Thursday.
The sale of the former Republic Windows and Doors plant to Sunnyvale, Calif.-based Serious Materials, a green-oriented windows manufacturer, was approved Wednesday by a bankruptcy judge.
The company has agreed to offer jobs to the former workers, said Mark Meinster, a spokesman for the workers' union, United Electrical Workers.
Serious Materials CEO Kevin Surace said much needs to be done before work can resume: A lease must be renegotiated with the factory building's owner, and plant equipment needs urgent repairs. He added, however, that despite the economic downturn, demand for his company's energy-efficient windows remains strong.
"If we can do all those things, everybody's going to get their jobs back," he said. "But there has to be a place to work first — and the equipment has to work. We're not quite there yet."
About 200 of the 240 laid-off workers occupied the Republic factory for nearly a week in December after the company gave them just three days' notice before closing the plant. Republic filed for bankruptcy shortly after the sit-in.
The protest drew national attention and supportive words from then-President-elect Barack Obama, and Republic ultimately agreed to the workers' demands for severance and accrued vacation pay.
Republic's main creditor, Bank of America, was criticized for cutting off funds to the plant, and then-Gov. Rod Blagojevich ordered all state agencies to stop doing business with the bank.
The workers had argued that the shutdown violated federal law because employees were not given 60 days' notice.
Copyright 2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
URL: http://www.msnbc.msn.com/id/29409618/

The network of kids' sites charges advertisers based on viewer "attentiveness," not mouse clicks

By Burt Helm

After a decade of experimentation, companies have yet to find a reliable way to burnish their brands online. Research shows barely more than 1 in 1,000 people click on banner ads. What's more, they rarely hang around long enough to absorb a brand message.

Former Madison Avenue hotshot Matt Freeman aims to change all that. Freeman's company, Betawave, is developing ways to boost visitor "engagement" and plans to charge advertisers not just by each click or view but also by people's attentiveness. The concept is untested, but it has generated excitement. Several venture capital shops in December put $22.5 million into Betawave (GOFH). "Matt's ahead of the curve," says Sean Finnegan, chief digital officer at Starcom MediaVest, which buys ads for Coca-Cola (KO), Procter & Gamble (PG), Nintendo, and others.

Mad Ave was shocked when Freeman quit as Tribal DDB Worldwide's boss in June to run a small company called GoFish. Tribal is widely considered to be one of the most successful creators of online ads anywhere. GoFish, on the other hand, sold ads on a handful of lesser kids' sites, such as Miniclip, which hosts online video games, and Cartoon Doll Emporium, where kids play dress-up with avatars. Yes, GoFish, known in the industry as an ad network, had a good reputation among advertisers looking for a cheaper alternative to sites run by Disney (DIS) and Nickelodeon. But it was in debt, its stock traded over the counter, and it was losing millions a year.

Freeman, who has since renamed the company Betawave, says he took the job because he saw unrealized potential. "[GoFish] was a tiara in the toilet," he says, noting that the sites Betawave represents share a valuable audience: kids aged 6 to 17 and their moms. The 25 million people who stop by Betawave sites each month spend an average of 15 minutes per visit vs. nine at Facebook, according to industry tracker Comscore. That "stickiness" has prompted Kellogg (K), Hasbro (HAS), Nintendo, and others to buy ads.

PAYING FOR ATTENTION
Still, Freeman knows companies want more evidence their ads are working. "Advertisers always say, 'Why am I paying for reach when what I want is people's attention?'" That's why he aims to charge not only for clicks on ads but also for how long people spend on a page and for how much they interact with the brand on a deeper level.

To make that happen Freeman is borrowing from television, which has been shoring up its prospects with "brand integrations"—advertisers can weave their products and messages into the shows themselves. In mid-February, Freeman launched something called Betawave TV. Essentially an online video player, the likes of which can be found on many sites, it provides a distribution platform through which clients can integrate their messages into original shows.

For the first such experiment, Freeman has enlisted Raven Symoné. The Disney tween star will appear in a video and provide style tips that likely will include nods to certain products. Viewers will be directed to WeeWorld, where they will be able to conduct a makeover on a Symoné avatar. Freeman plans to charge sponsors a production fee to set up sites like the Symoné makeover game. Advertisers also would pay based on the number of people who log in, the number of games played, or a combination of the two.

Betawave's success depends on whether visitors are drawn into the branded games and other content or simply watch what they want and move on. But for now, at least, Freeman has the advertising world's attention.

BY BRIAN DEAGON

INVESTOR'S BUSINESS DAILY

Posted 1/23/2009

Jason Nazar, founder and chief executive of Internet documents firm Docstoc, tells a story about the time he tried to hypnotize three people at the request of his college buddies.

He'd recently taken a weekend course on hypnotherapy, and this was his first show.

It flopped, big time.

He called the teacher to ask why he failed, and what his secret to success was. The teacher replied, "The next time you do a show, pretend that you are the greatest hypnotist in the world."

At Nazar's next performance he acted as if he were Harry Houdini in the flesh, full of flash and arrogance.

It worked. The group under his trance shivered when he said it was cold and panted when told they were hot.

"It was the most important lesson I learned about what to do when starting a business," Nazar told an audience in Santa Monica, Calif., recently, for a presentation he gave about mistakes to avoid. "The single most important thing you need when starting a business is belief in yourself, that you can do this."

Docstoc, based in Beverly Hills, Calif., was launched in November 2007 with the backing of venture capital firm Rustic Ventures and investors in other successful Internet startups. It's an Internet platform where users can upload and share a vast repository of documents on topics such as legal, business, technology and education. The site received 3 million unique visitors in January, up 25% from the prior month, said Nazar.

Errors To Avoid

During the presentation, Nazar ran down a list of mistakes to avoid when creating a company, among them not sharing the idea with enough people to get their impressions and advice. Another mistake lies in believing that your idea is totally unique, which is highly unlikely.

And just because someone else got there first doesn't mean the game is over. An example comes from the evolution of social networking Web sites, he said. Among the first was Friendster, which was shunted aside by My-Space and is now losing its luster next to Facebook.

"Just because something has been done before doesn't mean you shouldn't do it. Just do it better," he said.

He also advises budding entrepreneurs to remain confident and not give up too soon when road bumps slow their journey. Also, become your company's first salesman and prove it's a sound concept before building a sales staff. Don't over-analyze to the point of paralysis.

Entrepreneur Tony Greenberg, an early commercial pioneer in the Internet industry and chairman of technology outsourcing firm Ramp Rate, says many successful startups go through three or more business-model shifts before hitting the right mark.

"And people usually don't abandon a bad business model quick enough," he said.

It's also important to promote innovation by clearly understanding employees' core strengths and putting them in a role that will promote that.

Craig Allen, who has a track record of developing and launching interactive entertainment brands and services, and is currently chief executive at Spark Unlimited, a video game developer, advises not to underestimate cash needs and the timing of payments.

"A lot of times folks know how much they need to start a business but underestimate the amount of money required to get to the point of an operational and sustainable business," he said.

And in some cases payments due by partners can come in later than expected, especially if by doing so they believe they can use it as leverage to negotiate a better deal.

Be Prepared

He also recommends ensuring the business is ready to operate before adding staff and serving clients. This ranges from registering trademarks and having proper insurance to forming an employee handbook with all legal and policy points in place.

Lawrence Langs, a corporate attorney, investment banker and serial entrepreneur, provided this: "Letting legal and financial engineering lead the business instead of a business driving these considerations leads to a lot of roadkill."

On the flip side, "Not investing in proper legal structure, intellectual property protection or fully researching a business plan is sure to kill a company as well," he said.

Langs also says good companies often go astray due to personality- driven issues more so than operations or product issues.

"This is especially true in family-run businesses where nepotism and the business of the family takes center stage," he said. But it also applies to most nonfamily companies since they often act similarly.

Successful companies nurture and respect great talent.

"Many young companies treat employees as fungible and run into unexpected business interruptions as a result," said Langs.

Kelly Perdew, a serial entrepreneur and chief executive of RotoHog.com, a fantasy sports platform, warned against wasting time getting to market by overstressing perfection. When it comes to Internet ventures, get the site up as soon as feasible and start getting feedback from customers, he said.

"That feedback is worth more than a year in development," Perdew said.

And never forget that customers know more than you do, said Perdew. "Always listen."

And when it comes to leadership, said Mike Weiss, founder of Streamcast and its Internet file-sharing software Morpheus, lead by example. "Don't command respect. Earn it," he said.

GoFish Morphs Into Betawave
by Tanya Irwin, 2 hours ago
An announcement that GoFish Corp. is changing its name to Betawave in order to shift its emphasis to attention-based engagement metrics is expected today.
Matt Freeman, 39, who joined digital media and entertainment company GoFish in June, remains CEO of Betawave. Company headquarters will remain in San Francisco.
Freeman previously was CEO at Omnicom's Tribal DDB Worldwide. A self-proclaimed entrepreneur, Freeman founded that company in 1998 when it launched as the digital arm of DDB. He was recruited from Modem Media by Ken Kaess and Keith Reinhard, who were DDB's CEO and chairman at the time.
GoFish secured $22.5 million in private placement financing in December led by Panorama Capital, Rustic Canyon Partners and Rembrandt Venture Partners. The company provides online services including virtual worlds, advergames, and safe communities for youth and their parents by aggregating and distributing online content across a network of Web sites for which GoFish is the exclusive brand advertising partner.
http://www.mediapost.com/publications/?fa=Articles.showArticleHomePage&art_aid=98644

GoFish Corporation announced today that it had relaunched as Betawave Corporation. GoFish had built a portfolio of represented youth sites with a large emphasis on virtual worlds. The company says that the rebranding--and the reference to the Beta state of consciousness--reflects its commitment to advertising in contexts that promote engagement and attention over pure reach and pageviews. Betawave combines both with a total reach of 69 million unique users per month around the world averaging 54 minutes each month on Betawave partner properties. The rebranding follows a $22.5 million round of financing in Decemeber.

“The basic idea is to aggregate audiences that are relaxed and paying attention, and then help brands make an attention grabbing contribution to that consumer experience,” Betawave CEO Matt Freeman said in a statement. “We offer brand advertisers a simple solution based not just on how many people we reach, but on how much interest we generate. Brand advertisers deserve the same level of accountability as direct marketers. We are simply applying that same performance focus to brand-friendly media environments