Benjamin Kuo’s Blog

Linksys has been one of Southern California’s big success stories — bootstrapped by Victor Tsao, it was purchased by Cisco for $500M in 2003. Until now, the brand has continued as a separate product line over at Cisco, but there’s been some debate over whether or not to kill the brand name and just go with Cisco. Link to the Slashdot article, plus Om Malik has more over at GigaOm on the ongoing debate.

If Linksys does disappear, the brand will go the way of many other, Southern California businesses which were purchased and disappeared (for example, Overture Services, which is now Yahoo’s advertising unit). Personally, as a consumer (and former product manager) I’d keep the brand name, which has a lot more brand equity than Cisco does in the consumer market; in the consumer hardware business, where margins can be razor thin and consumers gravitate towards brands they have used and trust, it’s probably worth more to be a Linksys than a Cisco.

Interestingly enough, the technology industry hasn’t yet sided with the consumer goods industry, where branding and brand management is a huge deal and no one dares to kill a trusted brand (some examples: Best Foods and Hellman’s; Edy’s/Dreyer’s Ice Cream).

Microsoft just purchased Santa Barbara’s AdECN this afternoon, as the online advertising M&A frenzy continues. If you’re interested in what AdECN’s ad exchange does, I spoke to William Urschel, the firm’s founder and CEO last August all about the company.  It’s been a very, very busy July for acquisitions here in Southern California…

Business.com has finally been acquired, by Yellow Pages publisher R.H. Donnelley, in a deal worth $345M. The company has been rumored to be looking for a buyer since June, and was shopping a pricetag of between $300 and $400M for the company. I spoke with Jake Winebaum about the company earlier this year, on the firm’s move towards user-generated content with Work.com, how the business has been doing, and also on the notoriety the firm has for its record breaking purchase (during the go-go dot com years) of its domain name for $7.5M.

Following the technology industry day to day, I’m often surprised by the natural ebb and flow of the amount of technology news you see. Usually, the beginnings of the week are fairly busy, with less news (except merger and acquisitions) showing up toward the end of the week. And, summer (usually) is lighter than the rest of the year in terms of deals and announcements. News is usually a good barometer to how much is “happening” in any particular industry.

However, every so often you get a few days where things just seem to line up to make things very busy, or not busy at all. Yesterday, and today, were on opposite spectrums on the news scale. An example — not too many people here are aware that we have a sister site covering Silicon Valley (www.silicontap.com), which is essentially a version of socalTECH covering the venture industry up North — and on that site, yesterday there was a grand total of eight venture deals reported — on top of the regular flow of news you see in Silicon Valley on any day. However, today, there was practically nothing announced–not funding, not products, not new executives. You wouldn’t think all of Silicon Valley went home due to the power outage yesterday in San Francisco, but maybe they did?

E&Y and VentureOne just released their quarterly venture capital results today for Q2, and Southern California again topped $1B in investments in the quarter; glancing at the results it looks like we’re still #2 in the nation in terms of venture capital activity, behind Silicon Valley. Dan Primack at PEHub has the spreadsheet breakdowns posted for anyone interesting in dicing and slicing the data. The Los Angeles area had $459.2M in investments; a large chunk of that total was in Information Technology. San Diego followed with $382.05M in investments–interestingly this quarter, there were more IT than healthcare investments there–finally, Orange County saw $176.03M in investments, heavily weighted toward healthcare. (btw, E&Y has a strange breakdown in terms of regions, they lump Southern California’s individual regions into the “Pacific Southwest”, which includes Colorado and Arizona, and lump Silicon Valley’s individual regions into “Pacific Northwest” with Seattle, and Salt Lake City.)

It should be interesting to compare this to the PricewaterhouseCoopers venture capital survey results coming out later this week, where I should be getting much more detailed analysis and breakdowns of Southern California’s trends.

I’ve been fairly amused to watch an entire economy (bubble?) build in manufactured scarcity over the last few months, based on invitations to beta releases of Web 2.0 services. This week, it seems to be the currency of trade is Pownce and Ooma; a few months ago it was Joost; there seems to be a “new! exclusive!” invitation every week. I’ve even seen some people trying to trade their invitations on mailing lists.  It seems like the next step in this bubble-like cycle is to start a web marketplace for trading beta invites (Oops! Michael Arrington just bought one).

Seriously, the whole cycle around beta invites to web sites feels awfully like the manufactured scarcity that you see from the whole collectibles market, where the value of an item is not so much based on it’s true value and usefulness, but the perceived value due to a “scarcity” that has been conjured up by some good marketing. Even if a Web 2.0 company has a dumpy AJAX-social networking-video sharing-search engine-widget site which you’d never in your life use again, the idea that you can get one of the “exclusive!” invites makes it seem like it’s worth a lot more than it really is.    It feels (to me, at least) symptomatic of the human psychology behind things like the infamous Dutch tulip bubble.

There was a recent post by Bill Burnham, one of the many venture capitalists blogging about the business, outlining some of the basic steps to raising venture capital. Users of our venture database have been doing this for years, but I thought it was worth pointing out item no. 3 in his list:

3. Go through the raw list and identify those VC firms that make investments in your sector, stage, and city. You can do this by going to each firm’s website and reviewing their high level firm description and noting their location. As a general rule, it’s pointless pitching an early stage company to a Silicon Valley VC if you are in Alabama.

As a corollary to his step 3 on finding local VCs, I’d add that in some markets (Southern California, in particular) it’s not quite the case that Silicon Valley venture capitalists wouldn’t be interested in your firm. You just need to know which VCs a) regularly invest here despite not being located here, b) freuqently syndicate with local funds, and c) are “sector” specialists and aren’t as geographically contained. For example, you normally wouldn’t see Vinod Khosla hanging out in Southern California, but his firm, Khosla Ventures has made a large number of Southern California investments recently–all because of his cleantech focus.

I’ve been hearing a few stories lately from employees of venture backed companies, who–despite having what looked like fairly good exits for their firms–really didn’t see much from their stock options. This comes on top of several widely publicized sales where even the founders walked away with almost nothing. I’ve also recently been hearing from people in the private wealth business, who tell me that nowadays it’s really not worth talking to anyone but the founders of a venture backed business, because in the case of an exit they’re the only ones who seem to be getting a significant payout from a merger or acquisition.

I’d be interested in hearing from anyone with any opinions/experiences in this area…

Time just posted a list of their “Top 50″ websites for the year. The only Southern California site I spotted on the list was Veoh.com. Unfortunately, it seems like we had more companies making the “5 Worst Websites” list (to be exact, 3 out of the 5), including eHarmony.com, Evite.com, and MySpace.com.

“Networking” gets lots of lip service, in terms of how useful networking is in moving your business and startup forward. I’ve found that people rarely analyze and understand how to effectively network, and to make connections and go beyond just meeting people at random. A few years ago I met Dr. Elissa Grossman, a researcher who has been studying how entrepreneurs network with other people, and compares those behaviors with business success.

We’ve just posted a great contributed article from Dr. Grossman, now an assistant professor at Baruch College, CUNY on some great tips and information–based on her research–showing what techniques were most effective. Her article, Reflections on Entrepreneurial Networking, was just posted to our startup section.