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Report: Venture Capital Drying Up in Early 2009

The lifeblood of start-ups is slowing to a trickle, according to a statement from the National Venture Capital Association (NVCA).

Like everything else, venture funding for prospective businesses is drying up in the doldrums of the global economic downturn. The NVCA said just 40 venture capital funds raised US $4.3 billion in the first quarter of 2009, the smallest number of funds raising money in a single quarter since the third quarter of 2003. Overall, though, the dollars committed to new firms reflected a slight increase over the previous quarter when $3.5 billion was raised.

"The first quarter fundraising data suggests two distinct dynamics currently taking place during the economic downturn," said Mark Heesen, president of the NVCA. "First, the majority of venture firms are not actively fundraising at this time because they have either recently raised a fund and are investing those dollars or are waiting until market conditions improve. Second, despite the recession, venture firms with solid track records continue to be able to secure sizable commitments from limited partners as there remains a great deal of promise for future returns from the venture capital asset class."

Market conditions nearly halted the formation of new venture capital funds in the first quarter of 2009, according to the NVCA. Just three new funds and 37 follow-on funds were raised in the first quarter, or a ratio of over 12-to-1 of follow-on to new funds, compared to 6-to-1 in the first quarter of 2008 (with a 'new' fund defined as the first such at a newly established firm).

The funding from venture capital firms has long been a measurement of the health of such important economic sectors as the software industry, and in recent years it has sparked to life such start-up success stories as Amazon, eBay, Google, and YouTube.

Twitter: Not just the early bird gets the worm

Twitter has acquired all the trappings of success: its own insufferable terminology and and its own iPhone app.

But I believe Confucius put it best when he said, "more money, more problems."

This past weekend, Twitter was attacked by a worm:

Over the weekend, a computer worm attacked the Twitter messaging service in three distinct attacks, generating almost 10,000 spam tweets and compromising at least 190 accounts.

In a post on the Twitter blog, company co-founder Biz Stone said that no sensitive information was compromised as a result of the attacks.

But Estonian hackers now know what time you got up today! (cat sound)

I realize that Twitter has its place: good for posting links to stories or doing short blog posts when you don't have time to spend putting together a coherent string of 300 words. You'll understand the consciousness of the internet better or something. Great. I still don't get it, and honestly this is my maginot line. I'm not going to Twitter.

But ask me about Flutter!

'Nanoball' Batteries Charge a Mobile Phone in Ten Seconds

I complained last week that it seemed as though an opportunity to employ nanotechnology to improve the battery life of mobile phones was being missed.

While this might be a legitimate criticism leveled at the corporate types, for the scientist types nothing could be further from the truth.

Researchers Byoungwoo Kang and Gerbrand Ceder at the Massachusetts Institute of Technology have published in Nature their research on a battery that charges about 100 times as fast as normal lithium ion batteries, resulting in a mobile phone that could charge in 10 seconds and 5 minutes for hybrid electric cars.

The â''Nanoballsâ'' refers to balls of lithium iron phosphate with dimensions of 50 nanometers. While it has been known previously that these balls of lithium iron phosphate release and absorb lithium ions more rapidly than the cathodes found in conventional lithium ion batteries, the MIT researchers were able to speed up the process by coating the balls with a thin layer of lithium phosphate.

Okay, now that weâ''ve got quick charges, what we need now is for the batteries to hold charges much longer.

Hewlett-Packard Appeals Ruling in Patent Dispute with Cornell University

Hewlett-Packard (HP) said today that it has filed an appeal to a recent patent dispute judgment that awarded Cornell University US $53 million in damages.

The Palo Alto, Calif., computer maker said in a prepared statement that it will increase its cash reserve "to reflect the latest developments in the case" and that it expects to record a 1 to 2 cent charge per share to its second quarter 2009 earnings. The company advised investors that, excluding the one-time charge, its current financial forecast remains unchanged.

On 30 March, the U.S. District Court for the Northern District of New York issued post-trial rulings in the case (Cornell University et al. v. Hewlett-Packard Co.) that reduced the original jury award to $53 million from $184 million.

The dispute concerns Cornell's claims that a family of HP microprocessors, as well as the servers and workstations incorporating those processors, infringed a patent that describes a way of processing instructions developed by the university's researchers in the 1980s. The Cornell patent described a method of accelerating microprocessor performance by performing multiple functions simultaneously (or "multiprocessing"). The university claims HP incorporated the multiprocessing method in the PA-8000 line of processors introduced in 1996 without its permission.

The Cornell patent expired in 2006, so it should not affect any further HP products, according to the company.

The Ithaca, N.Y., university had not released a statement as of this writing.

Always On Except When You're Not: Communications Cut in Silicon Valley

att%20tweets.jpgYesterday I visited Ge Wang, the Stanford professor behind Ocarina, a popular iPhone app. We sat in his office, in an old mansion on a hill at the edge of the Stanford campus, and, using Ocarina on his iPhone, listened live to people all over the world playing music. We sampled melodies from Japan, Australia, and just up the road. We listened all the way through to a halting version of â''Amazing Grace,â'' being played by an iPhone user in Vancouver. The world felt small, all-connected; the magic of the internet practically shimmered in the air.

I didnâ''t realize until I turned on the evening news last night that while I was feeling oh-so-connected, much of Silicon Valley yesterday was anything but connected. Vandals had sliced ten fiber optic lines at four locations, taking out communications in parts of three counties. Land lines didnâ''t work, cell phones didnâ''t work, internet service didnâ''t work. You couldnâ''t get money from the bank (some banks were taking deposits); you couldnâ''t use your credit card in most places. You couldnâ''t text, you couldnâ''t facebook, you couldnâ''t twitter. (AT&T was sending out updates on its progress in fixing the fiber lines via twitter, itâ''s not clear how that info was supposed to get to the folks that needed it.) You couldnâ''t call 911. The local news suggested in case of emergency, for example, a house fire, drive to the nearest fire or police station and tell someone. This was not a reassuring suggestion.

The image that sticks in my mind from all the reports on coping with the communications cut is that of a Fedex delivery man, standing in front of a truck full of packages, baffled. He held that cool little gizmo that reads bar codes, accepts signatures, and, apparently, tells the driver where to deliver what. Without phone service, it was useless, and those packages werenâ''t going anywhere.

Photo: AT&T's twitter feed

Silicon Valley Suffers Phone, 'Net Sabotage

A swath of Northern California has lost landline phone service and Internet connectivity today, most likely due to sabotage.

Those in the area to the south of San Jose, including the high-tech Silicon Valley sector, found themselves without telephone service as of this morning, and local police report that they have found evidence of criminal activity, according to an article in the San Jose Mercury News.

A spokesperson for AT&T told the Bay Area newspaper that its personnel found four fiber-optic cables intentionally cut inside an underground vault in South San Jose. The communications carrier said there was an additional report of cables cut in the town of San Carlos.

Coincidentally, AT&T's contract with the Communication Workers of America expired at midnight Saturday. However, the AT&T spokesperson, John Britton, told the Mercury News that "we have a really good relationship with the union" and that negotiations continue between the two parties.

The service outage affects traditional phones, cell phones, and Internet communications for many customers in Santa Clara, San Benito, and Santa Cruz counties. The affected area is home to some of the world's biggest technology firms, such as Apple Computer, Hewlett-Packard, and Intel.

AT&T said it expects to have repaired the severed lines by the end of the day.

R&D Spending Today Could Hold Key to Tomorrow's Recovery

R&D Spending Today Could Hold Key to Tomorrow's Recovery

A terrific piece by the Wall Street Journalâ''s Justin Scheck and Paul Glader shows that the recession hasnâ''t yet led companies to pare their spending on R&D. It hardly dipped in the fourth quarter, compared to a year before, even though revenues fell by 7.7 percent.

The article suggests that companies may have learned, the hard way, that R&D cuts today will doom product lineups tomorrow. Consider how Apple and Motorola reacted to the last dot-com bust:

Photo: DHDesign

Apple boosted R&D spending 42 percent between 1999 and 2002, even as revenue fell more than 6 percent. Those investments helped spawn the iPod music player, introduced during the last recession in October 2001, and the iTunes music store, which debuted in 2003. Typically, investments in R&D take two to three years to pay off.

Motorola slashed R&D spending 13 percent in 2002. The company scored big with its super-thin RAZR cell phone in 2004, but failed to develop equally successful follow-up products. Spending on R&D has rebounded, but more slowly than revenue, and Motorola's market share and stock price have withered.

The Journal also cites General Electric as vowing not to repeat the mistake it made in the last recession, when it skimped on light-emitting diodes, a technology thatâ''s now competing with its incandescent bulbs. Hereâ''s the money quote, from Mark Little, GE's senior vice president and director of global research: â''It's fair to say our competitors have put more money into the lighting business, and it shows.â''

The article does note that the health of R&D may only be apparent, because the recession began to bite only months ago, whereas research projects last for years. A drug company would have to be sorely strapped to shut down a trial thatâ''s halfway through its two-year run, but it might well decline to start new trials. Thatâ''s why itâ''ll be some time before we know for sure how the recession is affecting R&D spending.

Where that spending goes is another question. As the Journal notes, and as Spectrum reported in latest annual R&D report, ever more research dollars are being funneled to India and China. Such outsourcing canâ''t be a mere reaction to the recession, because itâ''s been going on for years.

One more thing: correlation does not prove causation. Successful companies may dominate R&D not because itâ''s the key to their success but because they are the ones that can best afford it. A study a few years ago by consulting firm Booz Allen Hamilton found that though the top R&D spenders didnâ''t outperform other firms in their sectors, the bottom spenders did underperform. (Here was our take on that study.)

Glader explores this angle in a follow-on comment in Tuesdayâ''s Journal. He cites William Duggan of the Columbia Business School, who argues that marketing and operations budgets are more closely tied to success than are R&D budgets, citing Russiaâ''s example to prove that massive investment in research neednâ''t bear fruit.

Planning to develop an iPhone app and quit your day job? Stanford will help you for free.


Fridayâ''s New York Times repeated the oft-toldâ''and in this case trueâ''story of Ethan Nicholas, who developed a killer iphone app, iShoot, made $800,000 in five months, and quit his job at Sun Microsystems to work on iphone apps full time. He followed in the footsteps of Steve Demeter, who reported that he made $250,000 in two months with Trism, a color-matching puzzle.

While the vast majority of iPhone apps will make their developers pocket change at best, not life-changing millions, you have to think that these success stories will inspire more than a few of the tech savvy to head to their basements/garages/home offices/dining room tables and try to be the next Nicholas or Demeter.

And Stanford University has decided to help. The school just started posting videos of its popular 10-week course, iPhone Application Programming, online for free at Stanfordâ''s iTunes U. Videos will go up two days after each live class.

For Best Nanotechnology Video, the Winner Is...

I am afraid thereâ''s not that much suspense. Itâ''s just as I predicted two months ago. The winner of the American Chemical Societyâ''s competition for describing nanotech went to "The Nano Song" (, a warm-hearted, muppet-style video.

Since I already posted the winning video last February, I thought I would post the runner-up: â''Nanotechnology Brings us Delicious New Solar Cellsâ''. Those crazy, wacky kids at Notre Dame. Enjoy. By the way, this is the directorâ''s cut.

Nanomaterials Turning Us into Cyborgs? Whatever Next?

I have to confess one of my favorite past times is reading a mainstream journalist mangling a story on nanotechnology.

But in this example the journalist did a yeomanâ''s job only messing up the requisite definition slightly â''used to develop materials that are 100 nanometers or smallerâ''. Yeah, almost right, I think if you add the idea of materials with features below 100 nanometers it wouldnâ''t have sounded so odd to me.

Who really sounded odd to me was the nanotechnology expert who was visiting the beat reporterâ''s hometown, Akhlesh Lakhtakia.

Lakhatia, a professor with the Department of Engineering Science and Mechanics at Pennsylvania State University, wanted to express measured concern about the adverse affects of nanotechnology and referred to the oft-mentioned idea of a nanoparticle breaching the blood brain barrier.

This idea led him to the rather odd conclusion if this were to happen: â''And I cannot even begin to imagine what kind of cyborgs we will become then."

I guess this constitutes Lakhatia trying to avoid being an alarmist. But then again maybe the reporter misconstrued what he said as we have demonstrated to us recently.


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