Silicon Valley Watcher - Former FT journalist Tom Foremski reporting from the intersection of technology and media

A day in the valley: Seven startups at Sevin Rosen Funds; AOL's Ted Leonsis says AOL should have gone open years ago; Google's Raymond Nasr is leaving...

Posted by Tom Foremski - September 29, 2005

By Tom Foremski for SiliconValleyWatcher
Seven_Startups.jpgWednesday was another good day to be a journalist blogger in Silicon Valley.

I should go to bed; but this medium is sometimes so compelling, and captures the fun of journalism so well, that it is difficult to stop. Some of you know what I mean...

Hitching a ride into the valley

One of the day's challenges was how to get to a showcase of seven startups at Sevin and Rosen Funds, a venerable valley VC institution.

The VC firm never went for the dotcom low-hanging fruit, and feels uncomfortable blowing its own horn. Which is why I was intrigued with an event they hosted in their gorgeous Palo Alto offices (designed by one of the partners.)

Diane Schrieber, managing director of Spark PR was kind enough to give me a ride to Palo Alto, because my car was in the repair shop after an unfortunate Bullitt-style "bottoming out" on the streets of San Francisco, which required a new oil pan and engine mounting.

The ride to Palo Alto was a good chance to catch up with Diane and Spark PR, and hear about some of their new clients, such as Skype and one of Yahoo's largest business groups, which includes the My Yahoo! portal--still one of the best products on the internet.

Sevin startup Luminescent shines

The Seven at Sevin event was already underway when we arrived, but we caught at least five of the company pitches.

My pick of the group was Dave Fried's Luminescent venture. It targets one of the largest pain points in the chip industry: creating the masks that are used to etch the wires and transistors in chips.

Making the masks has become very difficult and very expensive and 50 per cent of the masks have to be redone. A state of the art chip design can cost several millions in mask costs--and that means you need to have a successful, high volume chip, which is never guaranteed.

Mr Fried used to run Applied Materials' Services division, a large business group at the world's largest chip equipment maker. This guy knows the problem areas in that industry and his company has figured out the mathematics needed to model wafer mask design--one of the most challenging problems in computing--to greatly reduce the cost of creating a set of chip masks.

The silver lining in layoffs

It was interesting to chat with Mr Fried about all the thousands of layoffs and cutbacks that Applied Materials has gone through. It could be argued that it became a victim of its own success in pushing the chip industry from 200mm silicon wafers to 300mm.

The chip industry got a 2.5 times immediate productivity increase, not to mention further gains from shrinking chip designs, copper, SOI...

Applied and its competitors couldn't get out of the price war that shrank margins to levels barely able to support research and development. And the rise of the huge foundries made capital investment far more efficient--also not good for business.

But the Applied Materials layoffs have let loose a wave of very talented people, who are continuing to innovate in new startups and help drive down the cost of chips, which then leads to all sorts of new businesses...the cycle of Silicon Valley.

The Seven at Sevin also included Alien Technology--the rfid chip leader, Alder Biopharmaceuticals, Nanomix with its carbon nanotube based gas detector chips, Neoscale Systems targeting data security through a novel key management system, Solidcore Systems which creates tightly controlled embedded computer systems, and Ultracell with a methanol based fuel cell.

AOL could have been the internet

Britt Cutsforth, also from Spark PR, was kind enough to drop me off at the Churchill club, somewhere in Sunnyvale, where Ted Leonsis, vice chairman of America Online, was on stage with Mitch Kapor, Lotus Development founder.

AOL recently opened its gates to the world--about fifteen years too late I would say. And interestingly, it is during a time when every one else is moving to walled communities...has AOL missed the tide again?

I caught the last half hour and it was interesting, here are some quick highlights.

Ted Leonsis:

-AOL should have been open from the very beginning. I knew it years ago, but I guess I wasn't brave enough or loud enough to push for that.

-There are more internet users outside of the US. I predict a lot of M&A in foreign markets as companies look for a jump start.

Mitch Kapor slams Silicon Valley public school system

Mitch Kapor was talking about the sad, sorry plight of the local education system when I walked into the room.

That is a subject dear to my heart. He was talking about a mentoring program he is involved in, which works with students from disadvantaged communities, and he says the success rate is incredible. The kids respond so readily within such programs, he said, and they do all the work -- they just needed a mentor.

He said such programs are people-intensive, but he believes they can be scaled. He also said that Silicon Valley's business interests are suffering because the rest of the world looks at the region and sees it has such a poor public education system. And that is not cool.

I have often been asked this question: How can Silicon Valley say "this is where the future is invented, this is the global capital of innovation;" and yet its public schools are not showcases, but basket cases?!

When I asked John Chambers, CEO of Cisco Systems, about this not too long ago, he admitted it was embarrassing, but said that the public school system was broken.

I think it can be fixed...but more on that later.

Raymond is leaving Google

Raymond Nasr, the current president of the Churchill Club, and Director of Executive Communications at Google, is leaving Google. His leaving party is this Wednesday, check your inboxes.

We were only able to exchange a quick nod and a wave so I'm relying on my sources--always very reliable--for information about this:-)

No word on Raymond's post-Google plans, but, he is a Fellow of Oxford University's Saïd Business School, and I do know the school will soon announce a $20m innovation center...

BTW, when is Google going to appoint a head of its Google Foundation?
Interviews have been going on for nearly 9 months now...I've got no shortage of big ideas, if that's what you need.

Back to Palo Alto

I next hop a ride with an old buddy, Uwe Maurer, who is making a name for himself as an international financier and who has introduced me to some very interesting German entrepreneurs such as Zooos(more on them soon) and Audio Bar.

I tag along as we meet some of his VC contacts in Copolla's in Palo Alto. Then back to the city as Uwe searches for CTIA parties but it's getting late, so we go to the Redwood Room, Uwe's current favorite haunt. It is late when Hans, his driver, drops me off home and I still have three more hours of work before bed.

BTW, Thursday is OutCast's 4th Annual CEO dinner event...this one is always interesting and not to be missed.

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