Silicon Valley Watcher - at the intersection of technology and media

Reuters reports:

President Dmitry Medvedev on Thursday announced that Russia would build a high-tech hub near Moscow to spur modernization of the economy and reduce its dependence on oil and gas.

The center, designed to develop five priority sectors -- energy, IT, telecommunications, bio-medical and atomic technologies -- will be built near Skolkovo, a new private-sector business school in the Moscow region.

(It would be tempting to call it "Silicon Steppes" if it were in Asiatic Russia...)

I had a very small part to play in this story. In late 2007 I met with a large Russian delegation that had come over to Silicon Valley to learn some of its lessons. Their goal was to use Russian oil money to establish several Silicon Valley-like regions.

They asked me lots of good questions. They made it clear that they did not want to replicate Silicon Valley, they wanted just the best bits.

I told them I would tell them the secret of Silicon Valley's success. They went silent, and leaned in closer to hear what I had to say. "Failure."

(This was before the EPIC Fail craze of recent times...)

Silicon Valley tolerates, and funds, massive amounts of failure. Only about one out of twenty startups succeed.

Probably no other culture allows people to fail as many times as Silicon Valley. Inside every successful Silicon Valley entrepreneur is a failed entrepreneur.

No other culture in the world, (except for maybe Las Vegas), tolerates and celebrates as much failure as Silicon Valley. This is the "best bit" of Silicon Valley, and its also the part that can't be exported.

They nodded. And they made some notes.

I asked them about how they would structure their VC funds, and about the Russian entrepreneurs that they hoped to attract.

One of them, the head of a quasi public/private VC fund, said that they had a problem finding and funding startups. It was an exasperating problem. The Russian entrepreneurs won't tell them about their business ideas.

They don't trust them. "I'm running a VC fund, I'm not going to run off with their business idea!"

- - -

By the way, did you know that Tim Draper, one of our most successful VCs, penned a song called "RiskMaster" to welcome the Russian delegation?

I have no idea what the tune is, obviously something stirring, I can imagine something between Red Army choir and Welsh choir:

Hey! You want to start a business?
Russia seems to show some promise
While weighing all your choices
"Go to Moscow!" you hear voices
Google founder came from Russia
Parametric? - Not from Prussia!
Genesis and PayPal too

SVOD and what is new?
With luck you'll become a
Master!

From Soviet biology
Comes really cool technology
Software immunology
From Nukes we get ecology
Ukraine's Orange Revolution
Good for all-freedom solution
And then political pollution
Now it's all in execution


Chorus:
With luck you'll become a
RiskMaster!

All you need is a faster chip
A million rubles
A couple of engineers
RiskMaster!

- - -

Please see: Turning Oil Into Innovation: Russian Delegation Seeks Silicon Valley's Lessons - SVW

I recently wrote about Twitter's business model as ultimately enveloping ever greater parts of its developer community. [Twitter Is The Black Hole Of The Twitterverse...]

After all, why leave money on the table? Why not produce the best desktop client, or mobile client? Why let others build lucrative businesses out of your community?

That seemed to be the way things were moving for Twitter after one of its engineers Tweeted:

"If you had some of the nifty site features that we Twitter employees have, you might not want to use a desktop client. (You will soon.)"

Khris Loux, co-founder of JS-Kit Echo, a commenting service, writes that Twitter has a choice of being a tyrant, or a benevolent king.

How Twitter Can Become A New Breed Of Technology Company | paidContent

Twitter has an opportunity to create either value or angst for the developer community. The Twitter platform has led to countless third-party innovations, resulting in a rich set of applications that enhances the core platform. And Twitter has publicly encouraged these developers to join in the “gold rush” of opportunity and build businesses on its platform.

Indeed, the staggering growth of the service and a healthy ecosystem of complimentary applications have made Twitter a sort of benevolent king.

Now the hard part: building a business without becoming a tyrant.

Twitter’s recent release of Twitter Lists, for example, undercuts the work of partners like TLists and shows the tightrope that Twitter (indeed all proprietary platforms) must walk to both grow their core platforms while also making sure that developers have an incentive to build on top of those platforms. Twitter’s failure to strike that balance could alienate a prime engine of its long-term value and growth.

Well put. But where is that balance?

How does it balance making money and letting others make money too?

How much money is it appropriate to let others make from your platform?

A young company such as Twitter, doesn't have the time to exploit all the business opportunities. That's why third-party developers have moved quickly to generate a plethora of Twitter apps: desktop clients such as Seesmic and Tweetdeck are two top examples.

But why let others profit from your community?

Twitter has investors, its management has a duty to maximize shareholder profits. And with each new round of investors, Twitter has to be able to promise new revenue growth.

Where's that going to come from?

It will come from looking at its developer community and seeing where the low hanging fruit is, where maximum bucks can be made from minimum development costs.

Twitter can decide to buy a business or develop a look-a-like. That's a simple decision: cost to buy the business versus development costs and time-to-market.

This is the way the way the world works, and it has nothing to do with being a tyrant or a benevolent king.

If you have a profitable business you will attract competitors. If you have a successful Twitter apps business, if it's not Twitter coming after you, it will be other developers.

If your business is small enough, it's probably not worth the development costs for Twitter to replicate it.

So the message to developers is: don't make too much money from your Twitter apps otherwise your star will be sucked in and extinguished by the black hole at the center of the Twitterverse.

I'm a fan of the work of SDForum, which organizes conferences and events related to SIlicon Valley innovation. The organization also has a Global Gateways initiative that seeks to build connections with technology centers around the world.

As part of that initiative, SDFroum has teamed up with the Dutch government to host an incubator for Dutch companies. I spoke with Susan Lucas-Conwell, CEO of SDForum.

"This is a first for us and also the Dutch government. We have room for about ten companies in the incubator with each one staying for between 3 and 6 months. The companies will have office space and a services package that gives them access to our events and to service providers."

SDForum runs about 20 events per month and has about 12,000 members in SIlicon Valley.

The first Dutch companies are getting ready, sorting out last minute visa details. Each company is expected to send one or more people. Any type of technology company is qualified including cleantech.

The Dutch government is helping to cover some of the costs. Individual companies will pay between $250 to $450 monthly.

In a statement, Bart van Bolhuis, Consul General of the Netherlands for 13 Western States in the U.S. said: "The opportunity for Dutch companies to expand into the U.S. market is huge, but success will often hinge on understanding local business and legal processes, culture and marketing."

Increasing numbers of companies are traveling to Silicon Valley from abroad to try to learn about Silicon Valley's success, said Ms Lucas-Conwell. Next Monday, SDForum is hosting the Prime Minister of Ireland, Brian Cowen.

Google [GOOG] today said that it had received a notice from the European Commission that it had received complaints from three European companies about its business practices.

Julia Holtz, Senior Competition Counsel at Google, wrote: Google Public Policy Blog: Committed to competing fairly

Foundem - a member of an organisation called ICOMPwhich is funded partly by Microsoft - argues that our algorithms demote their site in our results because they are a vertical search engine and so a direct competitor to Google. ejustice.fr's complaint seems to echo these concerns.

...Regarding Ciao!, they were a long-time AdSense partner of Google's, with whom we always had a good relationship. However, after Microsoft acquired Ciao! in 2008 (renaming it Ciao! from Bing) we started receiving complaints about our standard terms and conditions. They initially took their case to the German competition authority, but it now has been transferred to Brussels.

She added that Google is not "doing anything to choke off competition or hurt our users and partners."

Foremski's Take:

Google is clearly keen to play up the Microsoft connection. This can be viewed as payback by Microsoft for Google's prior anti-trust complaints about Microsoft.

But if Google and Microsoft move to escalate their competitive battles by using using anti-trust complaints against each other, Microsoft has a massive advantage. It is well versed in anti-trust laws here in the US, and also in the European Union, because it has had to defend itself against such complaints for many years.

Microsoft knows the anti-trust legal landscape very well, while Google does not.

Here's a couple of tongue-in cheek posts about how few women there are in Silicon Valley. (Hat tip Jeremiah Owyang)

The lack of single women in the Silicon Valley has a huge effect on what men do in the free time. Going to bars and picking up women is much harder in the Valley than in New York. Rather than going out, men stay in and do other more "nerdy" activities such as work, networking, programming, writing or engineering. These nerdy activities lead to innovation and technological process. The Valley would probably be much less successful if there were more women.

You can read the rest here: A Sexual Explanation for the Success of Silicon Valley

Also:

Countless VCs, pundits, founder helpers, xfounder VCs and most anybody else involved in the Valley/SF startup scene will ask you "when are you moving out here? This is where it is happening."

. . . what they don't tell you is that you will have nothing else to occupy your attention and keep you from working 80 hours a week cranking code with your nose in a computer screen. Why, because there are no women to distract you from your tasks.

Companies and their ratio:

Facebook:
Median Age 27 years Gender Male 68% Female 32%

City of San Francisco:
Median Age 32 years Gender Male 62% Female 38%

You can read the rest here: The Real Reason You're Wanted in Silicon Valley/SF « BUZZ in theHUB: Genotrope's Startup Watch

Also: Why There Are No Girls In San Francisco

I think it comes down to location, location, location. Meeting women down in Silicon Valley is tough, meeting anyone down there is tough. It's the suburbs. If you are single you have to live in the city. Not because there are more bars, but there are more things to do, more chances to meet anyone.

What's interesting about the statistics regarding San Francisco, is that it doesn't take into account the gay population. I know plenty of women that complain they can't meet any guys. For geeks seeking gals or guys, come up to the city, I'll make some introductions :)

Late last year, Rey Ramsey was appointed head of TechNet, the lobbying group established by John Doerr, which has support from a large number of US tech companies.

I had a chance to speak with Mr Ramsey earlier this week. He is in town to meet with some of his council members, such as Eric Schmidt from Google, and Paul Otellini, head of Intel.

Here are some notes from our conversation.

- Innovation is important to our economy but we need to get the involvement of many different groups and communities.

- I'd like to bring Silicon Valley to Alabama, to Arkansas, to many communities to show the benefits. (I pointed out that Silicon Valley cannot bring benefits to Silicon Valley.) [Silicon Valley Schools Should Be Showcases Not Basket Cases]

- We have to be inclusive. So that we can show the government that innovation is good for the country and show them what this means.

- We will be funding key research that shows the effect of innovation on communities.

- We need partnerships and allies if we are going to win.

- Education, immigration, and broadband are key issues.

- All sectors of industry are affected by technology and innovation.

- I've worked with lots of different groups and communities, I will be looking for common ground, how we can all work together. How we can all win.

Here is an interview with Mr Ramsey by Kara Swicher from AllThingsD:

More info:

One Economy's Rey Ramsey to lead TechNet - The Hill's Hillicon Valley

TechNet

TechNet chief takes a broad stand

Today's Silicon Valley Index report was very harsh on the state of education in Silicon Valley.

The New York Times reported:

California must do a better job educating local students, said Stephen Levy, director and senior economist of the Center for Continuing Study of the California Economy, who has served as an adviser to the annual study. "We're not going to be able to live on global talent forever," Mr. Levy said.

However, 5 percent fewer high school graduates are meeting requirements for entrance to state universities, the number of science and engineering degrees has leveled off and state general fund spending on higher education dropped 17 percent last year, according to the report.

It's a disgrace. I've raised this topic before. I've even raised it with John Chambers, the CEO of Cisco Systems, one of our best business leaders. He told me: "Tom, we've tried, and the educational system here can't be fixed."

I don't believe it. And I'm surprised that Mr Chambers would give up so easily. Surely, Silicon Valley is in the business of solving tough problems?

Silicon Valley's schools should be showcases and not basket cases.

How can Silicon Valley say to the world 'we are inventing the future' when its own neighborhoods cannot benefit from all that innovation?

Within a five minute walk of every Silicon Valley school there are enormous resources that could be used to raise educational standards.

Our Silicon Valley CEOs will fly to Washington D.C to complain about the state of US education, yet they won't walk down the street and address a local high school. That would be inspiring. Instead, It's embarrassing.

The annual Silicon Valley Index, produced by Venture Silicon Valley Network and Silicon Valley Community Foundation, says there is no recovery in Silicon Valley economy.

Silicon Valley enters 'new phase of uncertainty,' groups warn - San Jose Mercury News

The groups said the valley's long road to recovery from the recession is complicated by state budget gridlock, decreased education funding and competition from other regions. There are "clear warning signs" that the valley has entered "a new phase of uncertainty" in which its standing as a tech center is at risk, the report said.

There are big problems with the education system:

Total state funding for higher education declined 17 percent last year, even as the cost of education continued to rise, the index noted. Yet the valley will be increasingly dependent on homegrown talent for future innovation.

Kim Walesh, chief strategist in San Jose's Office of Economic Development, said the report "really nailed" the valley's increasing need for a healthy educational system. Because of post-9/11 restrictions on immigration and increased opportunities in India and China, the valley can't rely on foreign talent as it has in the past 25 years.

Report Warns Silicon Valley Could Lose Its Edge - NYTimes.com

The region, the center of the global technology industry, lost 90,000 jobs between the second quarter of 2008 and the same quarter in 2009. Unemployment is higher than national levels and the worst in the region since 2005, when technology companies were still recovering from the dot-com implosion.

Venture capital funding of new start-ups sank 37 percent between 2008 and 2009. And vacancies in commercial real estate jumped 33 percent.

Other economic indicators are also gloomy, the report found. "We show no evidence that the recovery has arrived," said Russell Hancock, chief executive of Joint Venture.

Bad news indeed. And this is likely not a cyclical issue related to the broader economy. There have been fundamental changes in the ways companies employ people.

Collaborative technologies produced in Silicon Valley now enable Silicon Valley companies to more easily make use of independent contractors rather than employees.

Judy Estrin, former CTO at Cisco:

"Silicon Valley is both a barometer of the rest of the country and a spark for the rest of the country, and if we don't protect that innovation culture here, it's going to be hard to sustain an innovation culture in the country," she said.

Please see:

Silicon Valley's Judy Estrin warns we are running out of innovation | Tom Foremski: IMHO | ZDNet.com

It's nearly ten years since the dotcom bubble became a dotbomb, leading to tens of thousands of lost jobs, lost wealth, and lost dreams.

It's been a long, slow recovery. Which is probably good compared to the volatility of the late 1990s. But wages still haven't recovered.

The San Jose Mercury reports on the latest Bureau of Labor Statistics numbers. Silicon Valley tech workers had rough decade

Wages in 11 high-tech industries averaged $120,000 in 2000, when investors' money was raining on the valley and competition for workers was fierce. By 2002, in the depths of the crash, average wages sank to $87,300, but by mid-2009, they had recovered to $105,500.

The Merc always puts together some great graphics:

I had an interesting conversation about iPhone and iPad apps development with Marine Leroux, the CEO of San Francisco based Bamboudesign.

Ms Leroux is a French entrepreneur. She worked on desktop application user interface design in France before founding her company here in 2008 to focus just on mobile applications, or specifically, the user interface design of mobile apps, mostly iPhone apps.

Bamboudesign works with large companies on projects where there are resources to finely craft the user interface design of apps in brand building projects.

Here are some notes from our conversation:

- When I was working in France people would tell me I should also work on mobile apps but the tiny screens of Nokia and other handsets didn't interest me much. When the iPhone was introduced I remember seeing the demos, that was when I realized that this was a great mobile platform. There was a large screen and I realized that this was what I wanted to do: design user interfaces for iPhone apps.

- We're very excited abut the iPad because of the larger screen and that means we can build much richer user experiences.

- There are some issues about running iPhone apps on the iPad. Running an existing app on a larger screen could cause problems because the resolution of the graphics may look pixelated. Lots of iPhone apps will have to be redone to look good on the iPad.

- Another issue is the approval process. We don't know if Apple will require a new approval process for iPad versions of existing apps. If that's the case, that will create a very large bottleneck. There are more than 140,000 iPhone apps currently. That's a good reason to have your iPad app ready sooner, to try and get ahead of the queue in the approval process.

- Clearly, not all iPhone apps can be ported to iPad, such as camera or phone based. But it should appeal to publishers of newspapers and books, etc, because it will be a much richer user experience.

- Unlike many other developers, we pay a lot of attention to the user interface design and we have a rigorous methodology to make sure the user has a great experience.

- We are big fans of the Corona software development kit. This is much better than Apple's iPhone SDK. You can write one-tenth of the code, and it has Flash-like features -- useful because Apple does not support Flash and we're not sure if there will be HTML5 support.

- We started a networking community group last July 2009 called "The iPhone Network Lounge" (www.iphonenetworklounge.com) and host monthly events in San Francisco. The community targets iPhone professionals and invites guest speakers in the iPhone industry to talk about iPhone technology, innovation, marketing, design, monetization models, and more.

These events are designed to share industry knowledge and help the developer and design community to better cater to market needs.

The iPhone Network Lounge has over 210 members and is now the leading iPhone networking group in San Francisco. I will be the guest speaker at the next event, this Thursday, February 4, and will present "Design iPhone Apps with Photoshop". 185 people are registered to attend the talk which will take place at the Adobe office in San Francisco.

I'm a huge fan of Doug Engelbart. When I first met him in 2005 I was astounded that this original thinker was still around -- but shocked that he was unable to secure funding for his work.

Here is a series of articles I wrote about Mr Engelbart.

What if Buckminster Fuller were still alive and looking for funding? I'm still in shock at Silicon Valley's blindness regarding Doug Engelbart

Exclusive interview with seminal 1960s computer visionary Doug Engelbart -- he's still here and looking for funding

A tribute to one of Silicon Valley's most influential and forgotten researchers at Xerox Parc event

The San Jose Mercury wrote about a tribute to Mr Engelbart at the Computer History Museum on Saturday:

Honoring a creative force in high tech: Douglas Engelbart turns 85 - San Jose Mercury News

"If all the leaders of the world -- the presidents of all the countries, the CEOs of all the companies -- were here in this room, you'd be my hero," [Steve] Wozniak, who co-founded Apple Computer and helped create some of the first commercially successful personal computers in the 1970s, told Engelbart. "You'd be the one I would gravitate to."

People still talk about the 1968 lecture that Mr Engelbart gave.

"The ideas were so fresh and resonated so powerfully with people who would go on to shape Silicon Valley that it "was the pivotal moment in computer history," said Bernt Wahl, an industry fellow at the Center for Entrepreneurship & Technology at the University of California-Berkeley.

Logitech has done the decent thing and provides Mr Engelbart with an office but he is still looking for funding for his ideas. And it's shameful that 20 'me-too' startups for each idea get funding but he doesn't have an Apple, or a Google, or a Kleiner Perkins funding his work.

As Google faces increased scrutiny by the Department of Justice for possible antitrust violations it has increased its lobbying efforts.

The Center for Responsive Politics (Opensecrets.org) has collected information on how much corporate America spends to influence the US government. In 2009, more than 15,600 companies spent at least $3.2 billion.

In Silicon Valley, Oracle spent the most: $5.1 million, followed by Google with $4 million. However, in Q4 2009, Google outspent Oracle. Since 2005, Google has increased its spend on lobbyists by nearly 16 times, from $260,000 to $4.03 million in 2009.

It's interesting to note that Oracle has had to fight antirust issues too, because of its acquisitions. In that regard, it has done better than Google. In 2008, Google had to abandon a search advertising agreement with Yahoo because the DOJ said it would file suit to block it.

Oracle has managed to overcome many antitrust investigations of its acquisitions.

Silicon Valley spending...

The San Jose Mercury has put together a great graphic on how much, and who, has spent the most in Washington:

Chris O'Brien at the San Jose Mercury News spoke with Alan Davidson, Head of US Public Policy at Google. [O'Brien: Google joins the titans of Silicon Valley lobbying]

Davidson said Google's efforts are benign, aimed at educating politicians and making sure its users' interests are being heard.
"We started this office with the same philosophy as we did the business," he said. "If you start with the user and focus on that, everything else will follow. If what we're doing is good for our users and the Internet community, then it will be good for us in the long term."

The problem is that the company often seems so certain of its mission that it can't believe anyone would question its motives.

It's the American Way for US companies to use their money to influence politicians and each one believes it is doing it for a common good.

Here are the top five industries lobbying Washington in 2009 from data compiled by Opensecrets.org.

Pharmaceuticals/Health Products $1,788,456,774

Insurance $1,328,484,288

Electric Utilities $1,221,825,728

Computers/Internet $1,011,127,902

Business Associations $935,616,339

Oil & Gas $901,093,876

- - -

Please see:

OpenSecrets | Lobbying Boom Continued in 2009 - Capital Eye

Tougher Antitrust Division May Target Google - NYTimes.com

Bruce Eric Anderson shared this link from Statesman.com: Austin church mobilizes volunteers, planes and medical supplies en route to Haiti in four days.

In just four days this community mobilized to fly aid to Haiti. Wow.

"Hill Country Bible Church Northwest was one of several organizations to organize efforts that will send 13 tons of medical supplies to Haiti."

It's an inspirational story. But they ran into a problem, they ran out of planes and fuel.

"Our biggest issue is that we could take another plane with just equipment if we had the funds to send it," Hurt said. "The fuel for each round trip costs more than $20,000."

That got me thinking... why not use the Silicon Valley corporate jet fleet to help speed relief supplies to Haiti? Even if they all did just one trip, that would be a huge help.

All the big companies have their own corporate fleets, and many individuals own large jets.

Intel has its own internal airline that employees use daily to link its Portland, Oregon campus with Silicon Valley.

Google has lots of large jets. It has a Jumbo Jet - 767-20. Think how much aid you could cram into that?

The New York Times wrote about the Google fleet:

The company had just added a Boeing 757 to a fleet that already included a refurbished Boeing 767 and two Gulfstream V's. All four planes had landing rights at Moffett Field, the NASA operated airfield that is a stone's throw from the Google campus.

And a fighter jet, a Dornier Alpha Jet.

OK, they can leave the fighter jet in the hangar because it's too small, but the rest of the Goggle fleet would be able to carry a massive amount of aid.

Come on Google, 'Do no evil' is great but "Do some good" is so much better.

Who else has jets? Oracle does, or at least Larry Ellison, the founder. But he has fighter jets, which aren't much use.

Hewlett-Packard has a jet, and so does Cisco CEO John Chambers.

There are many individuals in Silicon Valley that own, or lease, or own side businesses that lease jets to their own companies. Why not use them for Haiti aid?

Silicon Valley could rustle up a massive fleet in four days.

Silicon Valley can show how rich it is, how cool it is to be Silicon Valley - the global engine of innovation. (And we've got tons of jets...the fruits of our cool labors... You should join...)

And it shows that the tech industry does make a difference.

That would be a great message. And it would be great for Haiti.

---

Join this Facebook group if you agree. You don't have to live here to join. Maybe at least one company will notice and volunteer a jet.

If you have any pictures or info on Silicon Valley jets, please share them on the Facebook group. It would be great to know how large the Silicon Valley jet fleet really is.

I will post updates here and also on Twitter(@tomforemski)

UPDATE: Sergey Brin has been to Haiti - He volunteered to join a group bringing aid. You can read his account here.

Oracle president Charles Philips has been embarrassed by his ex-girlfriend who put up billboards of them together.

The New York Post reported:

The spurned squeeze, YaVaughnie Wilkins, went nuclear after she learned that Charles E. Phillips -- president of tech conglomerate Oracle and a member of Obama's Economic Recovery Advisory Board -- reconciled with his wife despite his lengthy affair with Wilkins.

Billboards appeared in San Francisco, New York, and Atlanta.

To some long-time Oracle watchers, and ex-Oracle staff, the fact that Oracle execs have an exuberant enthusiasm for the opposite sex isn't surprising.

Co-founder Larry Ellison set the pace with a bachelor billionaire lifestyle that made him the envy of many men half-his age. Leadership comes from the top.

One ex-Oracler told me, "One of my friends at Oracle was asked by one of the VPs if she would like to be his 'Tuesday girl.'' Apparently he had a vacancy."

Another ex-staff member told me: "Larry would sometimes date employees. You knew when the relationship was over because they would show up with a brand new Mercedes in the parking lot. That was his parting gift, he was a real gentleman. He owns a Mercedes dealership, or at least he used to. I guess he could get them at dealer cost."

I've no idea if the stories are true because I can't verify them. I'm only reporting them. For entertainment purposes only!

"Navigation has become a commodity, it's become the platform for innovative applications," said Christof Hellmis, Director of Navigation at Nokia.

This morning I made my way through torrential rain showers to a Nokia event in San Francisco, announcing that its Ovi Maps service is now free.

In one fell swoop Nokia said it had doubled the size of the world's mobile navigation market -- that's the kind of power Nokia has because of its status as the world's largest mobile phone maker.

Instead of paying $70 a year plus extra for services such as its traffic congestion navigator, all Nokia smartphone users are now able to download its Ovi Maps service for free.

"We intend to monetize the service through advertising and new apps that overlay hyper-local information about events and local businesses," said Christof Hellmis, Director of Navigation at Nokia.

Nokia is leveraging its acquisition of NAVTEQ in a bid to dominate the mobile maps market in a similar way that Google and Yahoo have done with their web browser based map services. Although Ovi Maps can be accessed through a web browser it works best on a Nokia smartphone.

Unlike Google maps, Ovi Maps works without the need for a data connection. The map is downloaded and it uses vector based imaging instead of bit-mapped images to reduce the size of the map data. This saves money on wireless data plans.

Nokia says that there are now a potential 50 million users of Ovi Maps.

Mr Hellmis believes that Ovi Maps will help Nokia sell more phones. "We could offer it on non-Nokia phones but we don't have plans for that yet."

The success of Ovi Maps as a platform for commerce will depend on how many innovative applications are developed. There are several thousand developers enrolled in a private beta of the Ovi Maps API.

Tracking apps...

Future apps might include versions of a research project in the Bay area between the Nokia Research Center in Silicon Valley, and the University of California at Berkeley. The Mobile Millennium project tracked the GPS locations of 5,000 Nokia phone users as they travelled on local highways and streets over a 12 month period.

This revealed traffic patterns and related data that could reduce traffic congestion by rerouting or delaying travel times.

"You might wait 15 minutes to take a trip because you'll avoid a long wait in traffic," said Mr Hellmis. The data collected from the project has also helped to improve the accuracy of predicting traffic congestion.

He said that the project revealed that there are three types of drivers: one type doesn't change routes no matter how bad the traffic congestion; a second type immediately tries to reroute around bottlenecks; while a third type will only seek an alternate route if there is a major problem.

Interestingly, there is an equal distribution of all three types of drivers.

Future Nokia maps apps might make use of location data collected from large numbers of Nokia phone users.

"The data would be collected anonymously since it's the statistical data of large numbers of Nokia travelers that we are interested in."

Peer-to- peer apps...

"Google has its data centers but we have the largest distributed computer system in the world -- the processing power in Nokia smartphones," said Mr Hellmis.

Peer-to-peer applications could take advantage of the ubiquity of Nokia phones. In the near future, your Nokia phone might be helping to provide computational services to another Nokia phone user nearby -- and vice versa.

CrowdFlower, based in San Francisco, has been in the news today because it raised $5m [CrowdFlower Raises $5 Million to Boost Crowdsourcing - Bits Blog - NYTimes.com]

I met CrowdFlower CEO Lukas Biewald in November and chatted with him about his company and about his iPhone app that lets people employ an African refugee, to do real work for them.

The refugees are given work assignments that can be done over the Internet. It's very mundane work of the kind that you might farm out to Amazon's Mechanical Turk, and the refugee earns points -- a type of virtual currency that can be traded in for food and services.

Here's the rate card:

• 5 points = 1 tomato, 1 large banana, a small bunch of greens
• 10 points = 1 SMS (text message); 2 oranges
• 50 points = 10 sweet potatoes, small bag of sugar
• 100 points = 1/2 a fish, portion of locally made bread
• 500 points = 1 large sack of charcoal for cooking
• 1,000 points = 5 minutes of cell phone airtime

Right now, CrowdFlower works with Dadaab, in Kenya, which is the world's largest refugee camp.

Maybe this can work in Haiti too? After all, humanitarian aid only goes so far, and runs out at some point. Teach a person to fish, or in this case, sort through databases of addresses looking for matching solar panel customers, and they can put those skills to good use in many other work assignments. It's not the most exciting work but it is work.

CrowdFlower and iPhone users could make a difference in the world. We just need a few computers, and an Internet connection in refugee camps. Maybe the one-laptop-per-child organization can get involved. We might need some guidelines regarding child labor.

There is more info here.

I must admit to mixed feelings with CrowdFlower. On the one hand, I don't like the way it can allow people to use the Internet to exploit others already in desperate situations. A refugee camp is not a leisure center.

On the other hand, it is bringing work to people in a desperate situation and potentially save lives. A refugee camp is not a leisure center.

By Rob Lemos and Erdin Beshimov

Last week, a class of 90 MIT MBA students traveled to Silicon Valley as part of the annual MIT Sloan Entrepreneurship & Innovation Class Trek. Our purpose was to cast a deeper glance at the entrepreneurial ecosystem on the West Coast by engaging entrepreneurs and venture capitalists in the Valley. We met with successful companies such as Genentech and LinkedIn, hot startups such as Aardvark and Yammer, and premier VCs from Sequoia, Kleiner Perkins, Accel, and more.

As co-founders of the MIT Entrepreneurship Review (think Harvard Law Review but from and for MIT; set to launch in February-March), we were keenly interested in entrepreneurial and industry trends, local investment perspective, and the Silicon Valley culture.

Here are our top 5 observations:

5) Be wary of hardware.

VCs in the West are big on capital efficient start-ups. The mentality that start-ups should stay agile and respond quickly to the market, a carryover from the days of the Internet bubble, continues to permeate the atmosphere. Interestingly, we found, at least anecdotally, that cleantech start-ups don't seem to be as hot in the West as here in the East - a) they typically require large infusions of initial investment and b) returns usually take several years. Hardware bets certainly can be very successful, but the feeling in the Valley is that it's important to choose wisely.

In a similar vein, consumer web is generally more preferable to enterprise software. Typically, consumer web startups are able to launch quickly and learn, iterate, and adapt based on user feedback, which is more difficult to do with enterprise software applications. As founder and CEO of Aardvark, Max Ventilla, aptly pointed out, the only real risk in consumer web is product fit.

4) The pathway to success is paved with failure.

Fail often but fail quickly - this is, perhaps, the most reiterated message from the Valley. It appears as though trial-and-error is an evolutionary process in the West where failures are seen as creating opportunities for better innovations to take root. Failure is encouraged and rarely punished. The spirit of the American West! And it's not that this message isn't well known, most of us have heard it multiple times before. It's that hearing this message live being continuously stressed by some very successful people brought it to life that much more.

At the same time, we heard from Doug Leone, Sequoia Capital partner and MIT Sloan alum, that successes and failures should be balanced. If you haven't failed, you haven't tried; but if you've only failed, you don't know how to do things right.

3) Social Media will reshape the world.

It's not just that the icons of Web2.0 such as Facebook and Twitter are all based in Silicon Valley, but that startups out West are responding quicker than anyone to the burgeoning business ecosystem around Facebook and Twitter. There was a big surprise in store for those students who visited Zynga, a rapidly growing (an understatement) social gaming startup, and expected to see a small, plucky, garage-based outfit. We found instead a huge (yet superbly funky) office and seven hundred employees - while the company was founded only two years ago! Absolutely impressive.

2) The people make the culture.

Silicon Valley has a culture characterized as fast-moving, encouraging of failure, and wary of prolonged investments. Add to that list a spirit of experimentation that is rampant and reinforced by the individuals who embody it. The environment is flat and welcoming; a nice change from the entrenched and often bureaucratic culture in the East. It was amazing that on our trip we were able to schedule meetings with some very busy and accomplished people at just a couple of days' notice. This is much less likely to happen in Boston.

1) Pivot.

Entrepreneurs cannot predict how their businesses are going to go. Business plans are only worth as much as the paper they are written upon. Therefore, an entrepreneur has to pivot upon his/her business plan according to the customer. Be careful not to let your customer rule the roost, but pay special attention to what the customer wants.

After our trip, the top question we are left wondering is this:

Is Silicon Valley going to host the next decade of Malcolm Gladwell's "outliers"? If not, where will they come from...?

At the MIT Entrepreneurship Review, we hope to continuously explore this question and many more by examining the interplay between science, technology, and entrepreneurship. If you want to be on the cutting-edge of thought-leadership in entrepreneurship, follow us on Twitter @MITEReview for updates and news about our upcoming launch.

Rob Lemos and Erdin Beshimov are MIT Sloan MBA students Class of 2011. To see the MIT Entrepreneurship Review's "About Us" video, go to http://entrepreneurship.mit.edu/MITER.

Mike Arrington has hit back at Fred Wilson, New York city's leading VC, over allegations that he ignored facts in a news story about online scams that included Zynga, a top gaming company.

Zynga is one of a just few tech startups that is likely to have a successful IPO in 2010 -- at least that seems to be the consensus among its latest investors who piled into a recent $180 million funding round.

It hosts online games that are promoted on social networks, such as Facebook. However, it has been linked to scammy business practices in a series of articles published on TechCrunch late last year.

VentureBeat has a video of Zynga CEO Mark Pincus publicly admitting "I did every horrible thing in the book just to get revenues."

Mike Arrington criticized Zynga, as well as other companies, for knowingly benefiting from scams that bilked people out of millions of dollars through sham sales of services.

[Scamville: The Social Gaming Ecosystem Of Hell]

At the time, I wondered about the reaction of Zynga's A-list investors to the scandal, especially since CEO Mark Pincus had failed to stop scam ads appearing:

Zynga Credibility Evaporating - What's The Effect On Its Super Star VC Investors?

Fred Wilson, one of New York's top VCs at Union Square Ventures is also a lead investor in Zynga and although he replied to my post, he wouldn't say anything about the controversy -- until now.

Business Insider found an interesting exchange of comments on Mr Wilson's blog in which he defends Zynga and its CEO and says Mike Arrington did not look at the facts and that quotes were taken out of context.

- "nobody who got involved in that shitstorm took the time to really do the work and look at what Zynga did and did not do. or compare it to Google and everyone else who does way worse on a daily basis. the whole thing totally annoys me. it's not fair."

- "the 'scammy ads' thing is total red herring that everyone got excited about but is almost entirely irrelevant.

You can read more here:
TechCrunch's ScamVille "S---storm" Was "Unfair," Says Zynga Investor

Mike Arrington responded with:

...to deny that there was ever a problem is irresponsible. And to suggest that we didn't take the time to understand the facts is outrageous. In addition to the 22 posts where we spoke to dozens of sources on and off the record, I asked Pincus to go on video with me to tell his side of the story without editing. He declined.

Mr Wilson is probably wishing that he had remained silent. This whole issue of scam ads has now resurfaced and it can drag in more companies than just Zynga.

Mike Arrington has named Facebook as an accomplice to Zynga, and even Fred Wilson has fingered Google, writing, "...Google and everyone else who does way worse [than Zynga] on a daily basis."

It's very bad timing because Zynga is being dressed for a possible IPO later this year. Questions over the source and quality of its revenues will spook potential shareholders.

I think this is an excellent subject and one of Mike Arrington's best stories and I hope that other news organizations take an interest, such as the New York Times, and take the story further. If I had the resources I would launch a series of investigations because if you follow the money, this story touches many large companies.

I'm glad that Fred Wilson has re-opened this story because it could become one of the best of 2010.

- - -

Please see:

The Dark Matter Of Internet Commerce - A Towering Pile of Scams - $1.4Bn And Counting...

Shocking: NYTimes Article On Virtual Goods Misses Huge Controversy

Zynga CEO Mark Pincus: "I Did Every Horrible Thing In The Book Just To Get Revenues"

Do we really live in an open web or is it only open until some companies say it's not?

Is the web truly open when companies such as Twitter, Facebook, MySpace, etc, can close the door to their data, or prop it slightly ajar?

With so many social networks and Web 2.0 applications it helps if third-party applications and services can access each other's data streams, especially if it is users wanting to aggregate their own media activities.

This is done through publishing an application programming interface (API) that specifies how other programs access your data.

But what is to be gained by doing this? Well, lots of pats on the back from the influential geekerati on Techmeme, who love open APIs because they look at the world from a user's point of view.

And there are other advantages, especially in the beginning because APIs allow many other services and applications to flourish, which helps spread your own service.

But open APIs can become closed or restricted at anytime.

For example, Friendfeed aggregates people's blog posts, Facebook activity, Youtube videos, Twitter posts, comments, etc. It does that because it has been granted permission to access user data from all those sites.

Steve Gillmor over at TechcrunchIT reports that Twitter has begun restricting its feed to Friendfeed (recently acquired by Facebook). He says Twitter is trying to "kill" Friendfeed.

Competitors will always seek to restrict their competition.

Of course Twitter turned them off. Facebook is Twitter's self-declared number one competitor. When you own the platform and the protocol you have every right to protect your own arse. In fact they have an obligation to their shareholders and investors.

Open APIs are a key foundation of Web 2.0. Yet this whole industry is being built on a very shaky foundation, one that can be closed at any moment.

If the world of open APIs is temporary then the open APIs are useless.

Why would anyone attempt to build a new service or product that relies on open APIs when that access can be restricted or closed at anytime?

Why would it the web become closed?

Because there's money in proprietary systems. Closed systems make money. It's much more difficult to make money in an open industry standards world.

Look at the PC industry with its razor-thin margins on PCs, while Intel and Microsoft make 60% plus margins on their proprietary PC technologies.

Look at Apple Computer and the fortunes it makes through its closed systems.

It's the traditional way money is made in the computer industry.

Open systems are anomalies.

I remember when email was first out, I started using MCI mail. But I also had to have a CompuServe, and an AOL account because there were no gateways between the systems. It took years before you could send an email seamlessly between systems.

It wasn't because the technology wasn't available, it was. It was because you could make more money by not having a gateway.

There are very few open industry standards that arose because companies agreed, and then only after many years of slogging through a tedious standards process.

The Internet is a collection of open industry standards that succeeded only because the US government financed and supported it. And it still took years to become well established.

But we've always had industry de facto standards. That's because one company eventually won out over all the others, and that's what we all began to use, their standard.

Is the X86 microprocessor architecture an open industry standard? No, it's a de facto industry standard developed by Intel. That's why Intel can maintain 60% plus profit margins.

Why should Facebook, Twitter, Yahoo, Microsoft, Salesforce, Google, or any other company with a valuable data stream, promise to give open access, to anyone, at anytime?

It would be opening itself up to competition. It would be giving up a key competitive advantage and a key competitive differentiator.

Where's the monetary value in doing that?

If open APIs can be changed at any time then they are not open, but ajar. This threatens the entire Web 2.0 sector. This is a very serious issue.

Chris Saad writes:

In the end, the only real solution for all of this, of course, is a return to the way the web has always worked (well). Open systems.

He is right.

But open standards will be years in the making, and in adoption. In the meantime, it looks like we will be heading into a closed web of the like that we haven't seen since before the Internet.

That's going to restrict innovation to a tremendous degree.

UPDATE: Craigslist blocks its data from Yahoo Pipes.

Don't be evil, Craigslist - Startup diaries

Yesterday (Nov 30th 2009), at approximately 2pm PST, Craigslist effectively killed all Yahoo Pipes projects that use Craigslist as a data source.

Indian entrepreneurs are everywhere in Silicon Valley. And a new report on the Bay Area Indian community measures the ties between Silicon Valley and India.

Here are some facts from the report, "Global Reach," by the Bay Area Council Economic Institute:

- Indian entrepreneurs helped found many Silicon Valley companies such as Sun Microsystems, Tibco Software, Brocade, Cerent and Hotmail.

- As a measure of its success, the median income in the Bay Area's Indian community is more than $107,000.

- 75% of adults have at least a bachelors degree.

- 70% are in management or professional positions.

- More than 40 Bay Area venture firms have Indian leadership and/or activity in India.

Silicon Valley/Bay Area has very close ties to India:

- Visa has issued more than 30 million debit cards and 32 million credit cards to Indian consumers.

- India hosts Symantec's largest engineering si.te outside the US, and works on more than 80% of its products.

- India accounts for one third of Adobe's global engineering workforce.

- Hewlett Packard is the largest player in India's IT market.

- Levi Strauss has 450 exclusive outlets in 80 Indian cities.

- Cisco second global headquarters is in Bangalore.

The report states: "The combination of Bay Area innovation and capital with India's engineering talent, it finds, can be a formidable one in global markets."

The report says that there are issues such as immigration reform:

"An Indian with an advanced degree can wait as long as five years before his or her application for a green card (permanent residence) is even considered. This makes no sense when opportunities in India are beckoning and other countries are aggressively competing for the same talent."

Please see: BayAreaEconomy.org

I was looking at a survey of small businesses and whether they would cancel their healthcare plans if public healthcare were available.

VerticalResponse, which offers surveys and email marketing services, polled 831 small US businesses about the effect of public healthcare on their business.

Theron Kabrich the CEO of The San Francisco Art Exchange, was one of the small businesses surveyed. He made an interesting comment and it is one that is very applicable to Silicon Valley.

"A public offering of healthcare unburdens small businesses and entrepreneurs alike, as it allows them to focus on core parts of their business such as innovations and new products. It also removes an unfair competitive advantage for small businesses when trying to attract the best employees, and levels the playing field."

Will Silicon Valley startups cut their current healthcare plans? They might.

High healthcare costs are a large burden for Silicon Valley startups. The availability of public healthcare should lead to lower costs for startup companies and make more capital available for investment in development.

VCs might demand a provision that their startups not offer healthcare plans. Would this harm recruitment?

Probably not because startups have fairly young staff and the attraction is not getting a safe job with benefits, but a chance to build a valuable business.

It'll be interesting to see how the availability of public healthcare affects Silicon Valley businesses.

- - -

The VerticalResponse survey found that one quarter wouldn't cancel their healthcare policies.

There were considerable disparities between different sized businesses. Of those with less than 10 employees, 72% offered no healthcare compared with 24% of businesses with 11 to 100 staff that offered no healthcare.

Here are some more findings:

- 40.9% of businesses with 11-100 employees wouldn't cancel their employer-provided coverage if there was a public offering and the largest portion of businesses with 1-10 employees also wouldn't.

- Of all small businesses an average of 16% of businesses would cancel their employer-provided coverage if there was a public offering.

- 71.8% of businesses with 1-10 employees do not offer healthcare to employees--versus the 69.4% of businesses with 11-100 employees who do offer healthcare to employees.

Electronic Arts, the Silicon Valley based video game company, yesterday said it plans to cut about 1500 workers or 17% of its total staff.

UPDATE: Adobe is cutting 680 jobs: Adobe To Cut 9 Percent Of Workforce

The job losses will add to already high levels of unemployment in the region. And they come at a very bad time - right before the holiday season. This will spread anxiety among all Silicon Valley workers, even at healthy firms -- EA and Adobe aren't in trouble.

Tamara Carleton, writing at New Geography reports "A slow job recovery in Silicon Valley."

Over the last year, California lost 732,700 jobs, the worst hit of all U.S. states, according to the U.S. Bureau of Labor Statistics.

The job situation in Silicon Valley has not rebounded as quickly as hoped. The area's jobless rate is nearly double what it was a year ago, according to the state's Employment Development Department. Nearly three times as many people are actively looking for work, versus during the dot-com bust, when the jobless rate peaked at 9.2 percent in early 2003. The recent number of unemployed is 110,900, representing an 87 percent increase from the prior year, according to the EDD.

The technology industry has continued to take a beating in the past six months. Cisco cut 700 local jobs in July, and Lockheed Martin slashed nearly 500 local jobs in August, based on state filings. Most recently in October, Sun Microsystems Inc. announced that it would eliminate up to 3,000 jobs across all sites, or 10 percent of its worldwide work force through the new year, due to the takeover by Oracle Corp.

While there are local business leaders such as Eric Schmidt, CEO of Google saying that the economy is improving, it might not mean much for Silicon Valley.

Tamara Carleton points out:

Job growth in the Valley has not been creating net jobs for over a decade...overall employment has actually dropped by 6 percent over the last 12 years, according to data from the U.S. Bureau of Labor Statistics.

These are very discouraging statistics especially since the past 12 years includes the boom years of the dotcom expansion.

The sobering fact is that a tech led recovery will likely be a slow jobs recovery. If you add into the mix other trends that are impacting the workforce such as greater outsourcing; more use of independent contractors; and greater productivity from investments in new business processes, a jobs recovery could become even slower.

The lack of IPOs is harming the cycle of innovation in Silicon Valley but if you look beyond our region, it's effect is much larger.

Grant Thornton, a large accounting firm, has published a study that shows the connection between IPOs and the health of the US economy.

And it shows how new listings in Asia are helping to shift wealth and competitiveness outside of the US.

Here are some of the findings:

The scale of the decline in IPOs:
- Just 12 companies went public in the US in the first half of 2009 - 4 were non-US.
- 1997 was a peak year for IPOs, since then it has declined 39% (55% decline if adjusted for GDP growth.)

Asian IPOs:
- Asian growth in new listings is far higher than its GDP growth.
- Hong Kong new listings have doubled since 1997, tripled since 1991.

The US is losing the number of listed companies:
- Just to maintain US listings at the current level would require 360 new listings a year - a level not reached since 2000. There were only 54 in 2008 and an average of 166 a year since 2001.

- The US would require 520 new listings a year to keep pace with GDP growth of 3%.

The study claims the US has lost 22 million jobs because of the lack of new listings.

Pascal Levensohn, Board Member of the National Venture Capital Association (NVCA):

"The inability for emerging growth companies to access U.S. public equity capital by completing IPOs below $50 million inhibits job creation and hurts American entrepreneurs more than any other group. Starved for long-term risk capital in the U.S., the next generation of innovative private enterprises will continue to move to non-U.S. emerging innovation hotspots, where startups are nurtured through attractive capital incentives, if we can't repair the bridge into public markets."

The study offers a long list of possible solutions. Here are some:

- Create an alternative public market segment
A public market solution that provides an economic model that supports the "value components" (research, sales and capital commitment) in the marketplace. It requires a parallel market segment that leverages a fixed spread and commission structure.

- Make enhancements to the private market
A private market solution that enables the creation of a qualified investor marketplace - consisting of both institutional investors and large accredited investors.

- Free companies to market their securities more broadly
Eliminate SEC or statutory restrictions on "general solicitation" or "general advertising," provided the ultimate purchasers are "qualified" investors. Permit companies and analysts to have media discussions of company performance and news...allow investment companies and ERISA accounts to invest a larger portion of their assets in unregistered securities.

- Overhaul verification of QIBs and accredited investors
Rather than requiring the company or private placement agent to verify, shift the burden to the investor to self-qualify (subject to liability for misstatements) for the new private placement market.

- Exempt companies from SEC registration
Permit holding of companies' shares by an unlimited number of qualified shareholders (eliminating the 500-shareholder and the 100-accredited-investor limitations).

- Self-regulate trading spreads
To attract capital and promote liquidity, this new market must create and preserve economic incentive for its constituents. Allow the market to set minimum quoted spreads and commissions.

- Exempt market participants from holding period
Exempt new market participants from holding period restrictions, and remove the obstacle requiring market participants to purchase unregistered securities with "investment intent." The "investment intent" requirement hinders the development of private markets, and is unclear and at odds with the very notion of what a market participant is supposed to do.

- Encourage centralized information, control and custody systems Companies should seek out marketplaces that provide systems to support the management and delivery of appropriate disclosure information, and that facilitate the tracking and delivery of shares.

-Research permitted to work with banking
As a market for "qualified investors," research analysts would be permitted to work with investment banking and be compensated on investment banking business, rather than be barred by FINRA Rule 2711 and the Global Research Settlement.

Foremski's Take:
There is no doubt that the lack of IPOs is harming the economy. However, this study appears to be an excuse to drive large changes in regulations governing the stock market and investments.

This will be difficult to do given the current lack of trust in Wall Street and its enthusiasm to exploit any arbitrage opportunity no matter the cost to society.

There would be plenty of new loopholes for Wall Street to discover with such a large number of new rules.

Also, there is nothing said about changing Sarbanes-Oxley. This is a huge burden on young companies and it is one of the largest obstacles to an IPO.

It would be far better to leave the stock market and investor regulations in place and to focus on reforming Sarbanes-Oxley.

This would be a much faster strategy in opening the door to new IPOs than persuading Congress to pass the many changes in stock market regulations that the study's sponsors have requested. There's little chance of that happening.

You can see the whole study here.

Guest Post by Sue Lebeck, Program Director of the "Silicon Valley Letters to Washington" initiative from the Silicon Valley Innovation Society.

We are facing an interesting time here in Silicon Valley, and in the entrepreneurial community at large. Just as innovation has been re-confirmed as a critical element of our national success, our once potent "innovation engine" is sputtering and may soon stall.

Our nation, and the world at large, faces an unprecedented array of challenges today. These challenges come in all flavors -- economic, social and environmental. New solutions to old problems are needed now, more than ever. As President Obama recently declared and we believe, we must "innovate our way out of this recession."

Moreover, we must innovate our way out of the constraints of our outmoded ways - whether in the fields of healthcare, finance, transportation, construction, manufacturing, energy, water, or the information systems that control them - the systems which drive our economy need to evolve. But first, the innovation-related structures which drive or impede that process need themselves to evolve.

"Innovation engine" is a potent metaphor for our innovation-driving structures. It reminds us of what is needed, and it underscores what is often missing in our innovation environment today. An engine needs fuel and air to run. The "fuel", if you will, is money: first, "seed" capital for an entrepreneur to investigate a solution; then "venture" capital to launch and grow a company; and finally a "liquidity event", such as an Initial Public Offering (IPO) of stock or an acquisition by another company, that frees the entrepreneur to repeat the cycle. All three types of funding have contracted significantly. Early-stage companies, more than ever, are choking. Many others are DOA.

Equally important to the operation of our engine is "air", the environment in which innovation operates. Laws and regulations, including tax policy, accounting rules and intellectual property rights are critical to support an innovation-friendly environment. Government policies have not kept up with the realities of innovating in a global economy; often they actively, if unintentionally, work against our ability to compete.

The Silicon Valley Innovation Leaders group, an informal collaborative convened through the Silicon Valley Innovation Institute (SVII)in late Spring of 2009, decided to launch an initiative to address the critical issues faced by the entrepreneurial innovation community. We've dubbed this initiative "Silicon Valley Letters to Washington".

This all-volunteer initiative was executed this autumn. Three working sessions over the space of two months produced a collaboratively written letter, viewable in detail at www.svletterstowashington.org. Its authors and contributors seek to share with our policy leaders the financial and environmental reality currently experienced by Silicon Valley entrepreneurs and, we imagine, entrepreneurs everywhere. We are outreaching to those in Washington who direct innovation policy, with a focus on the offices which manage Science and Technology and related policy.

Many additional issues are on our minds, but we wish to focus on these structural fundamentals. Our goal is not to speak just for ourselves, nor for any particular field of innovation, but for entrepreneurial innovators everywhere. Our hope: to engage in a dialogue that will inform and influence future innovation-related policy. For details on this letter, its recommendations, its authors and its audience, go to www.svletterstowashington.org. We hope you will review our point of view. Then, if you are an advocate of innovative entrepreneurship, we hope you will add your name to our cause.

Because, at the risk of being cliché, an innovation engine is a terrible thing to waste.

I recently blogged about an article focused on Silicon Valley's workforce and how the author, Tamara Carleton, believes that Boomers, Gen Xers, and Millennials can form a potent team.

In the innovation lifecycle, if Boomers serve as advisors and Gen Xers as the entrepreneurs, then the Millennials could provide potent networkers.

A reader writes:

As a member of the Boomer Generation and a longtime Silicon Valley worker, I can only hope that it happens that Boomers become trusted and knowledgeable advisers to Gen X'ers while Millennials do the work. My suspicion is that many, if not the majority, of those laid off in the last 2 years here in SV are actually Boomers who became "too expensive" for the tech companies here and thus were sacrificed.

I am one of them and I have been to many interviews but not offered jobs that I am very well-qualified to do. I guarantee you that age discrimination is running rampant in this so-called Valley of Heart's Delight.

Only when this ceases will companies be available to consider the vast storehouse of knowledge that Boomers could provide.

Is he right? I certainly know many people in that same situation, people with masses of experience and talent yet they are in their 40s and 50s and unable to find work.

Is there discrimination against older people? If Silicon Valley cannot tap into all of its resources it won't stand a chance in the global marketplace.

- - -

Please see: Can Silicon Valley Attract the Right Workforce for its Next Turnaround? | Newgeography.com

Plato said necessity is the mother of invention. Robert Goldman, a successful software engineer, didn't need to know anything about Plato, he knew that he needed to help his sister, diagnosed with terminal cancer.

In the process, he invented a breakthrough medical device that has the potential of saving the lives of tens of thousands of people. It's an inspirational story that movies are made from and Oscars awarded.

But that's far from Mr Goldman's mind. He's just happy that after more than 7 years, the FDA has given approval for a medical device that has the potential to shrink or kill tumors in people diagnosed with terminal cancer.

But let's start at the beginning. Let's start with Mr Goldman, who was happily retired.

Mr Goldman had made a fortune through his company GetMedia, which had developed a number of breakthrough technologies in the 1990s, that made possible things like the digital download. He sold his intellectual property to Nathan Myhrvold, the former Microsoft CTO, founder of Intellectual Ventures, an IP licensing company.

He now had plenty of money and no longer needed to work. But early retirement was marred by news that his sister had been diagnosed with cancer and the prognosis was terminal.

Here are some notes from our conversation:

- I wanted to help my sister as much as I could. I went to Medline, where there are hundreds of thousands of documents describing clinical studies, to see what I could find.

- There are billions of dollars spent every year on clinical studies. I was surprised to discover that there were sometimes clinical studies of treatments for which there were no clinical applications. The trials would show successful results but no clinical applications.

- I found a 1987 Italian funded set of clinical studies that showed successful treatment of tumors by the application of chemotherapy directly into the tumors. But I could find nothing since then.

- Tumors develop a feeder vessel that provides them with blood. I came up with an idea that if you could make a catheter small enough, you could thread it through a patient's blood vessels and directly into the tumor's feeder. You would then be able to direct chemotherapy straight into the tumor.

- I decided to design and make the device. I founded Vascular Designs in 2001.

- Medical device startup companies generally take a lot of money, around $25 million is a fairly typical first round capital requirement.

- I had absolutely no idea what I was doing, or what it would take. But I wanted to make sure I wasn't completely delusional. I thought I would start at Stanford and met with Dr. Michael Dake, professor of cardiothoracic surgery at Stanford University School of Medicine. He told that me if I could produce the device it might very well work.

- But there were many people who told me it couldn't be done, or that the materials wouldn't work, or that I would never get it through the FDA process. I would ask them if this is because they had done the research? They said no, they hadn't, but it wouldn't work anyway.

- I ignored their advice. I was determined to go ahead with it because I wanted to help my sister as much as possible, even though I had absolutely no idea what I was doing.

- I managed to outsource a lot of the work. I found a company in Santa Cruz, through the Internet, that could help me with the design.

- The first catheter we produced we were told it was too big. There was no easy way to scale it down. We had to start again.

- It took us two years to do the engineering. And it has taken the FDA seven years and two months to approve the product for sale. We were able to shorten the FDA process a little by saying that it was similar to other devices that had already been approved.

-Because the FDA is so strict it will be very easy to get approval in other countries.

- We are now just 2 months away from using it in cancer treatments.

- It cost just $1.8 million to develop. I did raise some funding only because some good people I knew wanted to be a part of this and this was how they could participate. They will make a lot of money from this, which is good because they can put it towards the development of other life saving products.

- I'm hoping that if people read about this device they will bring it to the attention of their doctors despite some medical practitioners not believing that it can be done. When you have terminal cancer and you have exhausted all other treatments why wouldn't you want to try this?

- There was no prior intellectual property around this device, we own the IP. The market for this runs into the billions of dollars.

- I'm not interested in the money, I already have enough money. I just want to help people. We want to make sure that this is available to people who can't afford the treatment. Why should this be only for the rich?

- It's too late for my sister. She died and suffered terribly. I can't wait to meet the first person and their family that will benefit from this. I've found my agenda in life and it's about helping people.

- - -

Mr Goldman showed me the catheter, a long very thin teal colored tube that is attached to three plungers. When Inserted into a blood vessel (a clear plastic tube for the demo) the plungers inflate two balloons that produce a tight fit. This blocks blood flow to the tumor. A separate plunger can then deliver chemotherapy directly into the tumor. The device can be used to treat any solid tumor, breast cancer, brain cancer, pancreatic, etc.

Here is a video of how it works:

Here is today's announcement of FDA approval:

Potential Breakthrough Cancer Treatment Now Available from Vascular Designs - The Company Announces FDA 510(k) Marketing Clearance for IsoFlow™ Infusion Catheter, Making Possible the Direct Delivery of Chemotherapy to Cancerous Tumors

It's always interesting to meet with outsiders and to hear their view of Silicon Valley, just as it is to leave the valley and notice that there's a whole world outside of our echo chamber (that doesn't care about our little world and its spats and spittle.)

Last week I was on a panel with Carolyn Pritchard, from GigaOm, speaking about the future of journalism. As always, it's the people that turn up to such events that interest me the most.

One of the people I met was Jose A. Del Moral, A Spanish entrepreneur. He was visiting for a few weeks and popping into various events around Silicon Valley. He said he was shocked about how positive everyone is in Silicon Valley.

Mr Del Moral wrote a blog post: There is a lot of bullshit in Silicon Valley.

Everybody is so nice! You have to be really careful, as people are not so honest with how they really feel. There is a lot of bullshit in Silicon Valley! If you come here with white shoes, they will get brown so fast...

Jim Clark, co-founder of Silicon Graphics and Netscape was one of four winners of the SDForum 2009 Visionary Awards. He spoke about his earlier life and how he was thrown out of school, then trying to get out of Texas, then trying to get out of the navy. It seems his instincts for an exit strategy have served him well as a Silicon Valley entrepreneur...

He also spoke about the importance of Stanford university and its encouragement of entrepreneurs. Other universities look down upon business people.

Judy Estrin: Silicon Valley Unwilling To Fix Structural Problems Around Innovation, Blame Others

Kay Koplovitz: We Need More Women Entrepreneurs

Vinod Khosla: How To Succeed In Silicon Valley By Bumbling And Failing...

Judy Estrin, one of Silicon Valley's top entrepreneurs, continues to sound warnings that innovation is in danger because of fundamental structural problems.

Ms Estrin again voiced her concerns during her speech at the SDForum Visionary Awards 2009. She was one of four recepients of the annual awards.

She said that Silicon Valley has been living off the innovative work that has been created over the past 30 years but that there needs to be new work done to support future startups.

"What I've been struck by, and concerned by, is that although everybody seems to understand that we have significant structural problems, few are willing to acknowledge their role in the solution. Each group tends to point to someone else that needs to change. The VCs need to take more risk, Wall Street needs to be less short-term focused, government is too involved, government is not involved enough... This is natural because change is hard. But isn't innovation and change what this valley is all about?"

She said that there is a need for "sustainable innovation" so that our future generations, our children, can experience a quality of life at least as good as we have had.

Here is her speech:

The SDForum Visionary Awards are my favorite event of the year because there are tons of great stories and contacts to make. It was good to see BusinessWeek's bureau chief Rob Hof, and also Rebecca Buckman from Forbes, but apart from them, there was very little media there -- which was great for me because it gives me more chance to get exclusive stories, which I did. I'll be publishing more stories and video over the next few days.

Here is a taste of what's to come and also some notes from the evening: