May 26, 2018

DealBook: Multinationals Stake a Claim in Venture Capital

Harshul Sanghi inside American Express's venture capital office in Facebook’s old headquarters in downtown Palo Alto, Calif.Peter DaSilva for The New York TimesHarshul Sanghi inside American Express’s venture capital office in Facebook’s old headquarters in downtown Palo Alto, Calif.

MENLO PARK, Calif. — New York, London and Hong Kong are common addresses for blue-chip multinationals. Now Silicon Valley is, too.

From downtown San Francisco to Palo Alto, companies like American Express and Ford are opening offices and investing millions of dollars in local start-ups. This year, American Express opened a venture capital office in Facebook’s old headquarters in downtown Palo Alto. Less than three miles away, General Motors’ research lab houses full-time investment professionals, recent transplants from Detroit.

“American Express is a 162-year-old company, and this is a moment of transformation,” said Harshul Sanghi, a managing partner at American Express Ventures, the venture capital arm of the financial company. “We’re here to be a part of the fabric of innovation.”

The companies are raising their profiles in Silicon Valley at a shaky time for the broader venture capital industry. While top players like Andreessen Horowitz and Accel Partners have grown bigger, most venture capital firms are struggling with anemic returns.

The market for start-ups has also dimmed, in the wake of the sharp stock declines of Facebook, Zynga and Groupon, the once high-flying threesome that was supposed to lead the next Internet boom.

But unlike traditional venture capitalists, multinationals are less interested in profits. They are here to buy innovation — or at least get a peek at the next wave of emerging technologies.

In August, Starbucks invested $25 million in Square, the mobile payments company based in San Francisco, which will be used in the coffee chain’s stores. This year, Citi Ventures, a unit of Citigroup, invested in Plastic Jungle, an online exchange for gift cards, and Jumio, an online credit card scanner.

Banco Bilbao Vizcaya Argentaria, the large Spanish banking group, opened an office in San Francisco last year. The team, which has about $100 million to fund local start-ups, is looking for consumer applications that will help the bank create new businesses and better understand its customers.

“We are in one of the most regulated and risk-averse industries in the world, so innovation doesn’t come naturally to us,” said Jay Reinemann, the head of the BBVA office. “We want to avoid the video-rental model. We want to evolve alongside our consumers.”

The companies are hoping to tap into the entrepreneurial mind-set. Multinationals, with their huge payrolls and sprawling operations, are not as nimble as the younger upstarts. While they are rich in resources, big companies tend to be more gun-shy and usually require more time to bring a product to market.

“Companies cannot innovate as fast as start-ups; increasingly they realize they have to look outside,” said Gerald Brady, a managing director at Silicon Valley Bank, who previously led the early-stage venture arm of Siemens. “We think it’s happening a lot more than people recognize or acknowledge.”

Of the 750 corporate venture units, roughly 200 were established in the last two years, according to Global Corporate Venturing, a publication that tracks the market. In the last year, corporations participated in more than $20 billion of start-up investments.

Big business has played the role of venture capitalist before, with limited success. During the waning days of the dot-com boom, financial, media and telecommunications companies sank billions of dollars into start-ups.

The collapse was devastating. Although some managed to make money, far more burned through their cash. In 2002, Accenture, the consulting firm, scrapped its venture capital unit after taking more than $200 million in write-downs. The previous year, Wells Fargo reported $1.6 billion in losses on its venture capital investments. Dell, the computer maker, closed its venture arm in 2004 and sold its portfolio to an investment firm. (It resurrected the unit last year).

Companies say they are taking a different approach this time. Rather than making big bets across the Internet sector, investments are smaller and more selective.

“We invest with the idea that we’re a potential customer for a company,” Jon Lauckner, G.M.’s chief technology officer said. “We’re not looking to make several $5 million investments and make $10 million on each. That would be nice, but it’s not important.”

As they try to find the right start-ups, some are forging tight bonds with local firms. BBVA, for example, is an investor in 500 Startups, a venture firm that specializes in early-stage start-ups and is run by Dave McClure, a former PayPal executive.

Unilever and PepsiCo are limited partners in Physic Ventures, a venture capital firm designed to help corporate investors build commercial partnerships with portfolio companies. Both Unilever and PepsiCo have installed full-time employees in Physic’s downtown San Francisco offices.

American Express has stacked its investment team with technology veterans. Mr. Sanghi, the head of the office, has spent roughly three decades in Silicon Valley and formerly led Motorola Mobility’s venture arm. Through its network of relationships, the office has met with roughly 300 start-ups in the last six months.

The connections have started to pay off. Vinod Khosla, the head of Khosla Ventures and a co-founder of Sun Microsystems, introduced the American Express team to the executives at Ness Computing, a mobile start-up. In August, American Express partnered with Singtel, the Singapore wireless company, to invest $15 million in Ness.

Mr. Sanghi says Ness is a logical investment and a potential partner. The start-up’s application connects users to local businesses through customized search results.

“It’s trying to bring consumers and merchants together in meaningful ways,” he said. “And we’re always trying to find new ways to build value for our merchant and consumer network.”

For start-ups, a big corporate benefactor can bring resources and an established platform to promote and distribute products. Envia Systems, an electric car battery maker, picked General Motors to lead its last financing round because it wanted to have a close relationship with a major automaker, its “absolute end customer,” said Atul Kapadia, Envia’s chief executive.

Although the company received higher offers from other potential corporate investors, Envia wanted G.M.’s advice on how to build the battery so that one day it could be a standard in the company’s electric cars. After the investment, G.M. offered the start-up access to its experts and facilities in Detroit, which Envia is using.

“You want to listen to your end customer because they will help you figure out what specifications you need to get into the final product,” said Mr. Kapadia.

A marriage with corporate investors can be complicated. Besides G.M., Asahi Kasei and Asahi Glass, the Japanese auto-part makers, are also investors in Envia. They both build rival battery products for Japanese car companies.

Mr. Kapadia, who prizes their insights into Japan’s market, says his company is careful about what intellectual property information it shares with its investors. At board meetings, confidential data about Envia’s customers is discussed only at the end, so that conflicted corporate investors can easily excuse themselves.

“In our marriage, there has not been a single ethics concern, because all the expectations were hashed out in the beginning,” Mr. Kapadia said. “But I can see how this could be a land mine.”

For the big corporations, start-up investing is fraught with the same risk as traditional venture investing. Their bets might be modest, but blowups can be embarrassing and can rankle shareholders, who may see venture investing as a distraction from the core business.

OnLive, an online gaming service, offers a recent reminder.

The company was once a darling of corporate investors, with financing from the likes of Time Warner, AutoDesk, HTC and ATT. At one point, it was valued north of $1 billion.

Despite its early promise, the start-up crashed in August, taking many in Silicon Valley by surprise. The company laid off its employees, announced a reorganization and in the process slashed the value of the shares to zero.

“It can be painful when a deal goes sour,” James Mawson, the founder of Global Corporate Venturing, said.

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DealBook Column: David Ebersman, the Man Behind Facebook’s I.P.O. Debacle

It is David Ebersman’s fault. There is just no way around it.

Mr. Ebersman is Facebook’s well-liked, boyish-looking 41-year-old chief financial officer. He’s not as well known as Mark Zuckerberg, Facebook’s founder and chief executive, or Sheryl Sandberg, its chief operating officer and recently appointed director.

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But when it came to Facebook’s catastrophe of an initial public offering — the stock reached a new low on Friday, closing at $18.06 — it was Mr. Ebersman, not Mr. Zuckerberg or Ms. Sandberg, who was ultimately the one pulling the strings.

Now, three months after the offering, the company has lost more than $50 billion in market value. Let me say that again for emphasis: Facebook’s market value has dropped more than $50 billion in 90 days.

To put that in perspective, that’s more market value than Lehman Brothers gave up in the entire year before it filed for bankruptcy.

A lot of ink has been spilled over Facebook’s I.P.O., with investors and pundits mostly pointing the finger at the Wall Street banks, particularly Morgan Stanley, which led the offering, and at Nasdaq, whose numerous computer glitches on Facebook’s first day of trading undermined confidence in the stock. They clearly deserve blame.

David Ebersman, Facebook's chief financial officer.Paul Sakuma/Associated PressDavid Ebersman, Facebook’s chief financial officer.

Mr. Ebersman’s name, however, is mentioned only occasionally, usually in passing and typically only among Silicon Valley’s cognoscenti.

And yet if there is one single individual more responsible than any other for the staggering mispricing of Facebook’s I.P.O., it is Mr. Ebersman. He signed off on the ever-increasing offer price, which ended up at $38 after the company had originally planned a price range of $29 to $34.

He — almost alone — pushed to flood the market with 25 percent more shares than originally planned in the final days before the offering. And since then, as the point person for investors, he has done little to articulate how or why the company’s strategy will lift the stock price any time soon.

At a time when investors are looking for some semblance of accountability on Wall Street and in corporate America, it is remarkable that nobody — no bankers, no one at Nasdaq, no one at Facebook — has been fired for botching the offering.

Mr. Zuckerberg reportedly told his employees after the I.P.O., “So, you’ve heard we’re firing David?” But it was only a joke.

Facebook’s falling stock price is not just a problem for investors; it is quickly creating real questions inside the company about its ability to retain and attract talented engineers, the lifeblood of any technology company.

Employees who joined the company starting in 2010, for example, are now holding onto restricted shares that were granted at a higher price — $24.10 — than the current trading price. (It should be noted that these are restricted stock units, not underwater stock options, so they do still have real value, but not nearly what the employees had expected.)

Employees with some two billion shares will have the opportunity to begin selling them this fall, which is one reason Facebook shares have been depressed lately.

A spokesman for Facebook, Elliot Schrage, declined to comment and would not make Mr. Ebersman available.

Mr. Ebersman appears to have badly misjudged the demand for Facebook’s I.P.O. He was aided by errant advice from a cadre of banking advisers, who all had an incentive to sell as many shares as possible at the highest price possible. Morgan Stanley liked $38 a share, JPMorgan Chase thought the shares could be sold for even more, while Goldman Sachs thought they should be sold for slightly less — but all of them quickly jumped on board when Mr. Ebersman made his final decision.

Determining the price of an I.P.O. is as much an art as a science. After a company’s roadshow presentations, investors indicate how many shares they plan to buy. They typically ask for more shares than they expect to receive, sometimes twice as many. But in the case of Facebook, investors, anticipating huge demand, put in requests for triple or quadruple the number of shares they expected to get.

The bankers — and Mr. Ebersman — did not seem to appreciate what was happening. They seem to have believed their own hype and took those orders as real, giving them the misplaced confidence to push the I.P.O. to the highest possible price and issue more shares.

But this wasn’t a traditional I.P.O. and should never have been priced that way. (People close to Mr. Ebersman say that he decided to issue additional shares with the goal of steadying the price this fall when the lockup on employee share sales expired. Consider that another miscalculation.)

Another issue that weighed on Mr. Ebersman, as well as the bank underwriters, was the example set by LinkedIn. Its shares rose 110 percent on its first day of trading. That might sound good, but it meant that the company mispriced the shares so badly that it effectively gave investors a gift of nearly $350 million. Mr. Ebersman was intent on making sure Facebook didn’t “leave money on the table,” according to several people close to him. But by leaving investors with little upside, he may have created additional pressure on the stock.

Both LinkedIn’s and Facebook’s I.P.O.’s should be considered failures — they were extreme examples of what could happen on the upside and the downside. The ideal offering lands somewhere in the middle. Still, there is no question that investors would prefer another LinkedIn over a Facebook, and they have every incentive to make an example of the company — and Mr. Ebersman — so that other companies don’t try to wipe out that first-day “pop.”

None of this is meant to suggest that Mr. Ebersman is dumb or unqualified. A graduate of Brown who was the chief financial officer of Genentech when he was just 34, Mr. Ebersman is bright, perhaps even brilliant. He was recruited to Facebook by Ms. Sandberg, a hire that was considered quite a coup at the time. He should clearly be given credit for negotiating favorable and extraordinarily large credit lines — $8 billion worth — with Wall Street banks, which could provide the company with an important lifeline should the economy and the company’s fortunes suffer.

The disclosures in the company’s I.P.O. prospectus — which were Mr. Ebersman’s responsibility — were, for the most part, pretty transparent, giving investors a good sense of the business, despite all the hype. And the I.P.O., for all its failures, filled Facebook’s coffers with some $10 billion.

Still, Mr. Ebersman has his work cut out for him as he tries to regain the trust of shareholders. He recently came to New York to meet with big investors, including hedge funds and institutional investors. Some invitations for meetings were oddly, and somewhat imperiously, sent out on Thursday night for meetings on Friday. Given that it was summer, some investors sent their junior analysts.

When Facebook’s I.P.O. first started to appear troubled back in May, I purposely avoided weighing in. Frankly, I thought it was too soon to judge.

But we have passed the pivotal three-month mark.

Statistically, the three-month mark is a much better predictor of a company’s future share price than any of the closing prices in the first week or two. According to Richard Peterson of Capital IQ, 67 percent of technology companies whose shares lagged their I.P.O. price after 90 days were still laggards after a year. Until Facebook’s stock rebounds, Mr. Ebersman will be feeling the pressure.

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DealBook Column: Taking a Risk, and Hoping That Lightning Strikes Twice

Sean Parker, co-founder of Napster and managing partner of the Founders Fund.Simon Dawson/Bloomberg NewsSean Parker, co-founder of Napster and managing partner of the Founders Fund.

Sean Parker, the 32-year-old billionaire and former president of Facebook — played by Justin Timberlake in “The Social Network” — was sitting on the top floor of his town house in the West Village of Manhattan last month, lamenting that too few entrepreneurs continue taking big risks after their first great success.

“Every good entrepreneur I know ends up in the wasteland of being a venture capitalist. It’s really frustrating,” he said.

Mr. Parker was sitting, or more accurately, slouching, on a couch next to his best friend and business partner, Shawn Fanning. Together, they founded Napster in 1999, the online music service that upended the entire industry before closing and filing for bankruptcy after losing a court case over piracy.

“How can you as an entrepreneur that’s had success, has a reputation, ever build the courage to go and do something again?” he asked, almost rhetorically. “Most entrepreneurs don’t remain entrepreneurs. It’s just too psychologically draining to have to constantly start over.”

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More than a decade later, however, Sean and Shawn are at it again. The two recently started a video chat service called Airtime. (Think Skype, mixed with Facebook and a twist of Chatroulette.)

Mr. Parker and Mr. Fanning are the exceptions to the successful-entrepreneurs-still-working theory. Sure, there are a handful of serial entrepreneurs out there in Silicon Valley: Jack Dorsey started Twitter and Square, for example, and Elon Musk, who was behind PayPal, now runs SpaceX and Tesla.

But the career trajectory of many tremendously successful entrepreneurs in Silicon Valley often looks like a rocket ship that stops in midair. Less charitably, Mr. Parker suggests some could be called one-hit wonders.

“The list of people who have started from scratch over and over and succeeded systematically over a long period of time is incredibly short,” he said. “The only person I can think of off the cuff is Jobs who had Apple, Next, Pixar, continued doing Pixar and Next and then Apple again, which is really a different company.”

He said that the tendency of great entrepreneurs was either to become merely an operator of one company or, like Sumner Redstone, move into an investor-ownership role.

The Silicon Valley version becomes a venture capitalist. For example, Peter Thiel, who co-founded PayPal, has gone on to be a successful venture capitalist through his firm Founders Fund, investing in other companies’ businesses, like Facebook and Spotify. But Mr. Thiel hasn’t endeavored to start a new company himself. (He did start a hedge fund, but that’s still investing.) He happens to be in business with Mr. Parker, who is a partner in the fund, which also invested in his Airtime.

Marc Andreessen, a longtime star of Silicon Valley, co-founded Netscape in 1994. He started two companies after that: Loudcloud and Ning. Both had modest success, but neither was comparable to Netscape. Mr. Andreessen became one of those venture capitalists Mr. Parker dreads, but with an extremely successful track record of having invested in some of the most promising technology companies, including Facebook, Groupon, Twitter, Zynga, Pinterest and Instagram (which was sold this year to Facebook for $1 billion).

Perhaps surprisingly, Mr. Andreessen said of Mr. Parker’s theory: “I sort of agree with him.” In an interview, he said many “former entrepreneurs crossed over to be V.C.’s and it hasn’t worked out well.” He added, “You don’t want to be Michael Jordan playing baseball.”

Mr. Andreessen said he differentiated his decision to pursue investing from that of other entrepreneurs-turned-investors, because he approached it as an entrepreneurial effort to “rethink the model of venture capital.” He has sought to reimagine the way a venture capital firm works from top to bottom, and so far, it appears to working quite spectacularly.

Still, to Mr. Parker, most entrepreneurs who seek out investments do so as “a total cop-out.” He explained his thinking: “You have a whole portfolio, you only focus on your successes, you ignore your failures and you get to continue looking like a player, but you’re ultimately not in control of anything.”

He continued: “Everything is probabilistic, nothing is deterministic, so you never have that satisfaction of knowing that you’re in control of an outcome. So you spend all of your time managing your reputation, managing your relationships and you spend almost no time thinking creatively or doing the things that an entrepreneur is good at doing.”

If it sounds as if Mr. Parker is talking only about others, he’s not. He’s also talking about himself.

After stepping down from Facebook in 2005, he joined Mr. Thiel’s Founders Fund and for several years worked on making investments, including in Spotify and Votizen.

He also worked on Causes, a site to raise money and awareness for issues and nonprofits. That venture only muddled along, and he said he did not commit to it wholeheartedly enough.

He said the biggest challenge for any new start-up by a previously successful entrepreneur was focusing too much “on downside protection, which is just assuming failure from the outset.” Being worried about failure and its effect on one’s reputation, he said, is “very dangerous.”

He said he was reluctant to start a new company like Airtime until just recently.

“The expectation thing definitely weighs on me. There’s a sort of fear of launching something and failing,” he said. “I had to decide I am going to try to go the road less traveled and just be an entrepreneur that’s willing to go back and start things from scratch.”

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DealBook: Redpoint e.Ventures Making Long-Term Bet on Brazil

SÃO PAULO, Brazil — At a time when the Brazilian economy is cooling, at least one Silicon Valley firm is doubling down.

Redpoint e.Ventures announced Monday that it had raised $130 million to invest in early-stage Internet start-ups in Brazil, South America’s largest economy.

The firm, less than a year old, is a joint effort between Redpoint Ventures of Menlo Park, Calif., and BV Capital of San Francisco, which has just renamed itself e.Ventures. Each firm had invested in Brazilian Internet companies separately, including the online travel site Viajanet and Grupo Xango, a tech holding company co-founded by a former Microsoft executive.

Jeff Brody, Redpoint’s founding partner, acknowledged Brazil’s challenges, including slower growth and sagging industrial production. On Friday, Brazil’s government lowered its 2012 gross domestic product forecast to 3 percent growth, from 4.5 percent.

“None of that is good news for us,” Mr. Brody said. “Europe and China slowing down will definitely impact Brazil.”

But he said that the firm was more focused on the long term, the next decade, and that recent economic concerns “were not mentioned at all” by investors in the new fund.

In fact, the firms raised more than their original $100 million target, said Mathias Schilling, a founder of Internet use is still growing, and so is the mobile Web, and Brazilians still face a large void in early-stage venture capital, presenting a major opportunity.

A few pioneering local firms have already tapped into the market, including Monashees Capital of São Paulo. In addition, Kaszek Ventures of Argentina holds just under $100 million, with two-thirds of its investments in Brazil.

Still, the Redpoint joint venture is the first such fund in Brazil originating from Silicon Valley, said Allen Taylor, director of global networks for Endeavor, an American nonprofit group that promotes entrepreneurship in emerging markets.

Redpoint “has really taken a leadership position from the beginning” in helping encourage Brazil’s start-up culture and seeking it out as a market, Mr. Taylor said.

The founding partners of Redpoint e.Ventures, based here in São Paulo, Anderson Thees and Yann de Vries, say they will typically make initial investments from a few hundred thousand dollars to $5 million.

For many, the benefits go beyond the cash.

Camila Souza introduced the fashion shopping site Sophie Juliete with her partner, Ronald Beigl, last week. It is backed by Redpoint e.Ventures and IG Expansion.

Thanks to the presence of the new fund, and what she hopes will be other funds to follow, she said “entrepreneurship will become a lot more professional now” and less dependent on wealthy families.

“It will influence people who before did not really believe it was possible,” she said.

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DealBook: Yahoo and Facebook Settle Patent Lawsuits

The headquarters for Yahoo in Sunnyvale, Calif., and Facebook in Menlo Park, Calif.Ryan Anson/Bloomberg News and Jim Wilson/The New York TimesThe headquarters for Yahoo in Sunnyvale, Calif., and Facebook in Menlo Park, Calif.

Yahoo and Facebook agreed on Friday to settle a legal fight over their patent holdings, ending what was shaping up to be one of the nastier court battles in Silicon Valley in recent memory.

Under the terms of the pact, the two companies will expand an existing partnership, including a deeper integration of Facebook’s tools into Yahoo’s content pages.

The two companies have also agreed to cross-license all their patent holdings, which would keep either side from suing the other over intellectual property issues in the future, a person close to one of the companies said.

What the agreement does not include is any sort of cash payout by Facebook, a win for the company.

The pact is intended to heal a rift between two companies that less than a year ago had begun an extensive collaboration. As part of the agreement, Yahoo and Facebook have agreed to work together to promote big events, hoping to draw increased advertising revenue.

“We are looking forward to building on the success we have already seen to provide innovative new products and experiences for both consumers and sponsors,” Ross B. Levinsohn, Yahoo’s interim chief executive, said in a statement. “Combining the premium content and reach of Yahoo as the world’s leading digital media company with Facebook provides branded advertisers with unmatched opportunity.”

Patents have increasingly become a focal point as companies like Apple and Eastman Kodak have turned to suing rivals over intellectual property claims. But such moves are often frowned upon within Silicon Valley. Yahoo took many by surprise earlier this year when it threatened to sue Facebook, claiming that it had violated some of its oldest Web technologies. Yahoo filed suit in March, citing 10 patents in particular.

Several technology commentators criticized Yahoo as a “patent troll” that was simply seeking a big payday.

Analysts also expressed surprise, given that Yahoo’s use of Facebook tools appeared to have improved its own business. Integrating Facebook’s news activity feature into Yahoo pages, for instance, tripled Yahoo’s traffic from Facebook between September and December of 2011.

At the time, Yahoo argued that it was simply trying to protect its intellectual property.

Facebook countersued in April, claiming that Yahoo had breached some of its own patents, some of which the company had purchased.

Yahoo’s original legal campaign was masterminded by Scott Thompson, then the company’s chief executive. The lawsuit was filed at a particularly delicate time for Facebook: about two months before the company was set to go public.

In 2003, Yahoo acquired Overture, a search advertising technology company that had sued Google over patent issues. Yahoo settled the fight the next year, collecting 2.7 million shares from Google before the search giant went public.

But Facebook was prepared to wage a long and costly fight to protect itself against Yahoo’s lawsuit, people close to the company have said.

Settlement talks began shortly after the resignation of Mr. Thompson in May, following the revelation that his academic credentials had been misstated. Soon after becoming interim chief executive, Mr. Levinsohn contacted Sheryl Sandberg, Facebook’s chief operating officer, to begin negotiating a truce, according to people briefed on the matter.

Among Mr. Levinsohn’s concerns was that the patent fight was a distraction from the company’s focus on turning itself around, these people said.

The two sides spent several weeks working on the outlines of a potential agreement, including at the sidelines of the AllThingsD conference in May, these people said.

On Friday, Yahoo’s board — including directors who previously supported the company’s lawsuit — unanimously approved the settlement, one of the people briefed on the matter said.

“I’m pleased that we were able to resolve this in a positive manner and look forward to partnering closely with Ross and the leadership at Yahoo,” Ms. Sandberg said in a statement.

“Together, we can provide users with engaging social experiences while creating value for marketers.”

Shares of Yahoo dipped slightly on Friday, to $15.78, while those of Facebook rose nearly 1 percent, to $31.73.

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Green Blog: Pushing the Green Button for Energy Savings

Green: Business

The White House hopes that someday soon everyone will be able to monitor and control their home energy usage, and lower their monthly utility bills, with a few swipes on a smartphone app. At least that’s the vision of the Green Button initiative, a recent White House effort to bring together the nation’s utilities, energy consumers and private industry to develop Internet and mobile phone-style technologies and business models aimed at reducing energy consumption.

Tendril Energize allows homeowners to manage energy usage remotely.TendrilApps like Tendril Energize work with Green Button data to allow homeowners to manage their energy usage remotely.

At an event on Wednesday in Silicon Valley, California’s three major utilities – Pacific Gas and Electric, San Diego Gas Electric and Southern California Edison – became the first in the nation to announce they now support Green Button. Together the utilities serve about 10 million households.

The companies have worked together to make this data available to homeowners since Aneesh Chopra, President Obama’s chief technology officer, issued the challenge last fall. Mr. Chopra, who delivered the keynote address at Wednesday’s event, predicted that other major utilities around the country would follow California’s lead.

Through its Green Button program, the government hopes to coax all utility companies across the country to collect and produce energy usage data for homeowners in a standard format they can download at any time from a utility’s Web site.

Making this data available to the public would in principle lead private-sector companies to develop technologies like energy management systems and smartphone applications that can interpret and use the information. Homeowners in turn would seek out the applications that enable them to gain greater control over their home energy usage and save money, the thinking goes.

Mr. Chopra described the government’s involvement in this effort as a “cheerleader and impatient convener,” but emphasized that the endeavor would depend on private industry. Many of those players were represented at the event. Energy technology companies like Opower and Tendril described Green Button-compatible products they are building.

Tendril’s chief executive, Adrian Tuck, said his company had created a set of software development tools that had already attracted 150 app developers. His company also plans to set up an online marketplace, similar to Apple’s iPhone App Store or Google’s Android Market, where homeowners could download energy-related applications.

Simple Energy demonstrated its online game program that turns energy management into a competition. The company recently began trials of the game, along with Tendril’s energy monitoring device, with 200 residential energy customers in Texas and the San Diego area. Among San Diego Gas Electric customers who took part in a three-month energy savings contest last fall, the average monthly savings was 20 percent. The winner, called the Biggest Saver, reduced her energy usage by about 45 percent, according to the company, and won a laptop computer.

Providing the data in standard formats according to industry-accepted guidelines will be fundamental to expanding this market, Mr. Chopra said. A standard format allows software developers to create one version of their product that will work for all utility customers across the country. In this case, Green Button has adopted a standard developed by the North American Energy Standards Board, an industry-led group.

Building a smart electric grid, needed to support programs like Green Button, will also rely on consumer uptake of technologies like smart meters and appliances that offer up timely and detailed information on home energy use. Widespread adoption of these technologies is still some time off. According to recent studies by Pike Research, a clean tech research firm, only 22 percent of homes in the United States have smart meters. And privacy concerns have prompted some homeowners to block installation of these meters.

Still, Mr. Chopra is confident that Green Button will gain momentum with consumers and drive forward the other players in this market. At Wednesday’s event, he cited the success of Blue Button, a similar government program that allows military personnel to obtain their medical records maintained by Department of Veterans Affairs. Since Blue Button was offered in October 2010, more than 500,000 veterans have downloaded their records, and a growing portfolio of health care-related companies are building products to use this data, he said.

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Dodd Calls for Hollywood and Silicon Valley to Meet

Christopher J. Dodd now fills Mr. Valenti’s shoes. But he stays out of those halls, thanks to restrictions on his ability to lobby Congress until 2013.

It just cost him a big one.

A major push by copyright holders — including those in the Motion Picture Association of America, of which Mr. Dodd is chairman — for a tough federal law to control foreign online piracy collapsed this week under stiff resistance from technology companies and their allies.

On Wednesday, as Web sites expressed opposition to the legislation, important lawmakers withdrew their support, leaving Mr. Dodd and his associates scrambling to find what could be salvaged.

In an interview Thursday, Mr. Dodd said he would welcome a summit meeting between Internet companies and content companies, perhaps convened by the White House, that could lead to a compromise. Looming next Tuesday is a cloture vote scheduled in the Senate, which appears to promise the death of the legislation in its current form.

“The perfect place to do it is a block away from here,” said Mr. Dodd, who pointed from his office on I Street toward 1600 Pennsylvania Avenue.

But the startlingly speedy collapse of the antipiracy campaign by some of Washington’s savviest players — not just the motion picture association, but also the United States Chamber of Commerce and the Recording Industry Association of America — signaled deep changes in antipiracy lobbying in the future. By Mr. Dodd’s account, no Washington player can safely assume that a well-wired, heavily financed legislative program is safe from a sudden burst of Web-driven populism.

“This is altogether a new effect,” Mr. Dodd said, comparing the online movement to the Arab Spring. He could not remember seeing “an effort that was moving with this degree of support change this dramatically” in the last four decades, he added.

 That shift was exposed this week partly because Mr. Dodd found himself in a political knife fight while being forced to sheathe his most powerful weapon: 36 years of personal relationships with a Congress in which he had served as a representative and then senator since 1975, before joining the motion picture association last March.

Under legislation passed in 2007, Mr. Dodd is barred from personally lobbying Congress for two years after leaving office. Hired as the consummate Washington insider to carry the film industry’s banner on crucial issues like piracy, Mr. Dodd ended up being more coach than player. He helped devise a strategy that called for his coalition to line up a strong array of legislative sponsors and supporters behind two similar laws — the Stop Online Piracy Act in the House, and the Protect I.P. Act in the Senate — and then to move them through the Congress quickly before possible opposition from tech companies could coalesce.

But slow pacing gave the Internet and free speech advocates time to wake up and mobilize, turning what might have been a relatively simple exercise for Mr. Dodd and his allies into a bitter struggle. The delays violated a cardinal rule among professional lobbyists, who generally believe the worst enemy of a proposed law is the legislative clock.

Mr. Dodd said that the entire industry was surprised by the intensity of the objections that arose in the last couple of weeks. “This was a whole new different game all of a sudden,” he said. “This thing was considered by many to be a slam dunk.”

Data shows that copyright holders and supporters of the bills outspent opponents substantially in the early stages of the debate. But by many accounts the tech industry has stepped up its lobbying efforts in recent weeks. New spending reports expected shortly indicate whether the balance has shifted.

The Senate vote on Tuesday will show whether opponents like Ron Wyden, Democrat of Oregon, have succeeded in derailing that chamber’s version of the law.

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DealBook: Wall Street Jostles to Help Silicon Valley Manage Newfound Wealth

From left, Jason Bogardus, senior vice president; Mark Douglas, managing director of wealth management; Greg Vaughan, managing director; and Robert Dixon, managing director of wealth managment, at Morgan Stanley's offices in Menlo Park, Calif.Peter DaSilva for The New York TimesFrom left, Jason Bogardus, senior vice president; Mark Douglas, managing director of wealth management; Greg Vaughan, managing director; and Robert Dixon, managing director of wealth management, at Morgan Stanley’s offices in Menlo Park, Calif.

PALO ALTO, Calif. — Sam Odio expected a few congratulatory e-mails when he sold Divvyshot, his online photo-sharing service, to Facebook last April for millions of dollars.

Instead, his in-box was flooded with pitches from Goldman Sachs, Morgan Stanley and other Wall Street firms looking to manage his newfound wealth. Goldman has the inside track, having courted him with an exclusive factory tour of Tesla, the electric sports-car maker, and tickets to a screening of the final Harry Potter film.

“They sure know the way to a geek’s heart,” said Mr. Odio, 27.

Wall Street, as always, is going where the money is — and right now that is Silicon Valley. The latest Internet boom means there are more newly minted millionaires, and even billionaires, than at any time since the technology bubble a decade ago.

Many are brilliant young entrepreneurs and computer engineers. But for all their knowledge, the technology executives, many of whom are fresh out of college, are relatively clueless when it comes to estate planning.

“Betting the ranch on building a widget for the Facebook platform is very different than managing a long-term nest egg,” said Jay Backstrand, a vice president at JPMorgan Chase’s private bank.

Wall Street is more than happy to help — for a fee. Banks charge roughly 1 percent for overseeing a wealthy investor’s portfolio. Though that may not sound like a lot, it adds up when billions of dollars are involved.

Financial firms are salivating over the wealth being created. Facebook is readying an initial public offering that will most likely value it near $100 billion. Employees and directors at Zynga own more than a third of the online game company, which went public in December at $7 billion. The list of prospects is long: Groupon is worth $12.2 billion; LinkedIn, $6.8 billion; and Pandora, $1.9 billion.

Greg Vaughan speaking with a client at Morgan Stanley's private wealth management offices in Menlo Park, Calif.Peter DaSilva for The New York TimesGreg Vaughan speaking with a client at Morgan Stanley’s private wealth management offices in Menlo Park, Calif.

Banks are casting a wide net for potential clients. At Facebook, Wall Street brokers are wooing executives, rank-and-file employees and administrative staff members. Morgan Stanley has a dual strategy, with one team of advisers responsible for senior executives at large technology start-ups and another for lower-level employees. Chris Dupuy, who leads Merrill Lynch’s wealth management team in the Pacific Northwest, recruits from the C-Suite to the “corporate cafeteria.”

“Someone’s going to capture this wealth,” said Derek Fowler, a wealth adviser at Morgan Stanley. “We just want to make sure we’re out there.”

Banks are aggressively expanding in Northern California, even as they retrench globally. JPMorgan opened a 10,000-square-foot office in Palo Alto, Calif., a hub of venture capital activity. Goldman, which is eliminating some 1,000 jobs worldwide, plans to increase staff in San Francisco by 30 percent over the next year. UBS has more than doubled its wealth management staff in the area since 2008. “It’s very competitive,” said Joseph A. Camarda, who relocated from Philadelphia to lead Goldman’s wealth management group in San Francisco. “I think every firm has an A-list team out here.”

This feeding frenzy is familiar to those who experienced the last Internet boom. In the late 1990s, Wall Street descended on Silicon Valley, luring clients from marquee names like Yahoo and eBay. But after scouting clients from start-ups that flopped when the bubble burst in 2000, some banks pulled back.

This time, banks seem more aggressive. With start-ups growing faster than ever before because of developments in computing technology, it is critical to build relationships early. The emergence of secondary exchanges has allowed employees to sell shares before companies go public. Google, Facebook and other Internet giants are snapping up start-ups to spur growth, turning founders into overnight millionaires.

Geoff Lewis, the co-founder and chief executive of TopGuest, a mobile application acquired by ezRez Software in December, said he was surprised by the banks’ persistence. He was contacted by Goldman, UBS and Merrill within hours of the deal’s announcement.

“One bank, when I didn’t respond, asked if I’d like to attend a Sharks game with one of their managing directors to get to know them better,” Mr. Lewis said. He passed.

Advisers often tap existing clients for prospects and also scour industry sites, like TechCrunch or AllThingsD. The professional social network LinkedIn is an indispensable tool, with its database of start-up employees.

Personal connections matter, too. Andy Ellwood, an executive at Gowalla. a mobile application, received several e-mails when the service was sold to Facebook in December. But Goldman had already been in touch for months, after a broker met Mr. Ellwood’s girlfriend at a book club.

“In the middle of a lot of things going on, I didn’t want to deal with an overly aggressive sales person,” he said. “It was nice to know that there’s a friendly adviser, just a phone call away.”

But Silicon Valley’s culture of flip-flops and T-shirts represents a challenge to Wall Street’s staid, button-down brokers. Mutual funds and other investments don’t typically appeal to entrepreneurs, who often use spare funds to finance other start-ups.

Travis Kalanick, a co-founder of Uber, an on-demand car service, hired a broker a few years ago. But he grew skeptical after the adviser suggested a complicated investment that would make money only if a stock index fell within a narrow range.

“I felt like I was walking into a casino, where the dealer knew more than I did,” said Mr. Kalanick, who eventually left the brokerage firm.

Banks have been slow to adopt the latest technological innovations, which could make for a tougher sell in Silicon Valley. Neither Morgan Stanley nor Goldman has an iPad application for clients to manage their portfolio. Last year, a Merrill adviser met with a start-up employee in her 20s who brought along her parents. They discussed going to grad school or buying a home.

But Wall Street is trying to adapt its strategy.

Merrill executives are seeking advice from company employees under 30 on how to shape pitches. Barclays is pairing older wealth managers with young associates, who tend to be more familiar with social media.

“There are insights that one generation has — about technology, social media, networking — that another one may not fully appreciate,” said Mitch Cox, head of the Americas for Barclays’ private wealth management arm.

With a younger clientele, informational sessions focus on the basics, including buying a first home, paying off debt or building a portfolio.

Merrill offers “boot camps,” that explain fundamentals like mutual funds and dividends. The firm is building such a program for Facebook employees timed to the I.P.O., according to people briefed on the plans.

“It’s a big business opportunity,” said Greg Vaughan, a managing director at Morgan Stanley’s Menlo Park office. “There’s a lot of wealth being created out here.”

Evelyn M. Rusli reported from Palo Alto, Calif., and Ben Protess from New York.

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Corner Office | John Donovan: John Donovan of AT&T, on Seeking Results Instead of Praise

Q. What were some early leadership lessons for you?

A. There are certain characteristics that give people a start — and for me, I remember starting to use them when I was named captain of my hockey team. I think after that it becomes practice. I think those characteristics are the ability to set a framework that makes sense to people, and being articulate. You can look at the landscape, characterize it and set a framework for action, then be able to articulate it clearly. You have to have antennas for picking out what’s really important.

So you have to have those basic skills and be a good pattern recognizer. I was always good at those problems where you go “two, four, six, eight, what’s next?” And you start to put those skills together and then, like anything else, you get better with practice.

That said, if there’s a situation where someone else needs to lead, and it’s working, that is A-O.K. I don’t feel a burning need to be in charge, and I don’t feel that it’s a bad thing to follow when the right things are getting done. So in some respects, I don’t have the innate drive that certain people have about control and ownership and leadership. When I left Silicon Valley, a lot of people bet me that I wouldn’t last at ATT. They figured that because I’d been a C.E.O. before, I couldn’t go work at a big company where you have bosses, and you don’t control everything.

It really isn’t even a consideration for me. I just derive great satisfaction from a well-played plan. As a matter of fact, I have an aversion to situations where credit is showered upon leaders. Those don’t sit easily with me. Maybe that’s because I was one of 11 kids in our family. I love engaging, but I don’t like the compliments, with somebody saying, “Hey, great job.”

Q. Other lessons?

A. The first thing I noticed very quickly early on was that hard work is central to what you do, and that’s not any magic or science. I said, “Well, if I start today, and I outwork everybody, then the only question is the starting point.” So I figured that if I work really hard I can be in the top 5 percent in any field. It just gave me some comfort to say, O.K., I’m going to do fine financially, so I shouldn’t make decisions based on money. My objective should be to gain the broadest set of experiences I can, and just try to drill deep everywhere I can. And so I played the game for breadth. Early in my career, I bought businesses, fixed them and sold them. Some went well; some didn’t. I did some home development. I was in sales. I went back to business school.

A lot of people work hard to get ahead, and I recognized early on that it’s a differentiator. I just figured that there was a certain amount of this that’s just raw tonnage.

Q. What else?

A. I worked at Deloitte, and became a partner there. That’s probably where a lot of my development occurred as a leader. There were simple things around teams. I developed team skills because I started to engage in deliberate deflection of credit in an environment where it was all about credits. What I started realizing is that people appreciated when you played for the result, and not for your role on the team. So I learned there that giving credit away, deflecting credit, was an effective thing to do. I think I learned a lot of subtleties about teams and how you assemble teams.

Q. Can you share some more insights on that?

A. If you figure there’s a karma pool out there floating around for credits, you have to stop playing for credits. I remember the day I realized that, and that I probably never again needed to involve scorekeeping in anything that I did.

Q. What are some questions you ask when you’re interviewing job candidates?

A. I always ask questions about what words people would want on their tombstone. So I’ll ask, “If your professional colleagues were going to put three words on your tombstone — I mean literally three — what would those three words be?” And then the follow-up question is always the one that surprises people. I will then ask, “Instead of three, what’s the one word?”

I’ve tried to assemble teams with people who were grounded enough, and comfortable enough, to be able to have these kinds of conversations. When you find people who have that sort of grounding, then it can be about the problem you’re working to solve together, and not about the person.

The leadership part for me now is so much more about game planning than about the role that I play in the game plan. I love the opportunity to take a role that I had and give it away to another team member, and the team result is as good or better. I sort of see myself over time as needing to play the game less, but I’m becoming better at getting even better results by that combination of the right framework and the right people in the right positions.

Q. Back to your tombstone question. What’s the one word for you?

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You’re the Boss Blog: A Start-Up Incubator That Floats

Max Marty: “a way to connect Silicon Valley with the amazing founders and entrepreneurs out around the world.”Courtesy of BlueseedMax Marty: “a way to connect Silicon Valley with the amazing founders and entrepreneurs out around the world.”


The adventure of new ventures.

Technology gurus have long lamented how hard it is for foreign talent to secure American visas and create start-ups here. As Congress spins its wheels with endless debate over immigration, an ambitious venture based in Sunnyvale, Calif., is trying to chart a more productive course aboard a 600-foot boat, or possibly a barge.

That’s the idea behind Blueseed, which aims to create a visa-free, floating incubator for international entrepreneurs off the California coast near Silicon Valley.

Blueseed’s co-founders, Max Marty, 27, and Dario Mutabdzija, 31, envision a seaworthy, 1,000-passenger hothouse for entrepreneurs from around the world, moored 12 nautical miles offshore — just outside California’s territorial waters — with enough appealing amenities to make it a “Googleplex of the Sea.” Passengers could take a day trip by ferry to the mainland on temporary tourist or business visas, returning to sleep in cabins that would rent for $1,200 to $3,000 a month.

“Blueseed is a way to connect Silicon Valley with the amazing founders and entrepreneurs out around the world,” Mr. Marty said. “Existing visa policies were designed for a different era. The nature of business has changed, and what’s lacking now is an avenue for people to be able to come in and create great companies.”

Peter Thiel, a co-founder of PayPal and prominent venture capitalist, signed on recently as an investor in Blueseed. The company is currently seeking additional investors to raise a total of $500,000 in seed capital.

“Tech innovation drives economic growth, and we need more of both,” Mr. Thiel elaborated in a written statement for this blog. “Many innovative people have a really hard time getting visas, and Blueseed will help bring more innovation to California with a solution that is itself as innovative as it is clever.”

Mr. Thiel, a staunch libertarian, made a splash in August by contributing $1.25 million to the Seasteading Institute, a Sunnyvale nonprofit founded by Patri Friedman (grandson of Milton Friedman, the economist) that explores the creation of autonomous ocean colonies. He declined through a spokesman to say how much he had invested in Blueseed.

Mr. Marty and Mr. Mutabdzija first met as directors of business and legal strategy at the Seasteading Institute. They estimate that their current project could end up costing $15 million, if they charter a vessel, to $40 million, if they buy one. They hope — perhaps optimistically — to have it afloat in 2013.

Past efforts to ease immigration restrictions for entrepreneurs have seemed less the stuff of science fiction. In February 2010, Senators John Kerry and Richard Lugar introduced the first version of the Start-Up Visa Act, which would create a path to citizenship for immigrant entrepreneurs who meet benchmarks for raising capital and creating jobs. Though the bill has since been reintroduced, it hasn’t made any progress.

Champions of both Blueseed and the Start-Up Visa Act are quick to point out that immigrants were founders of more than half of Silicon Valley’s start-ups between 1995 and 2005, according to Duke University research. They add that, without strivers from abroad like Sergey Brin and Vinod Khosla, companies like Google and Sun Microsystems would not be part of America’s tech ecosystem. (Mr. Marty’s parents are both Cuban immigrants and entrepreneurs; Mr. Mutabdzija was born in Sarajevo.)

For Blueseed’s founders, the first hurdle will be convincing potential investors that their vision is not as far-fetched as it might seem. They believe it is a matter of cobbling together best practices from well-explored, less exotic territory — maritime engineering, international law — to create great work-live-play spaces for tech dreamers. Foreign entrepreneurs, they say, are hoping for the chance to marinate in Silicon Valley, and more than 60 of them have expressed interest in the project through an online survey.

“I and many others are suffering over the situation that we cannot go to America to be around these people,” said Nico Schweinzer, a serial entrepreneur reached by Skype in Graz, Austria, where he created JobGuru, an employment site, and is building Oracly, a service that lets shoppers scan product bar codes with smartphones to receive short reviews. “For me, it’s not so much about the investors, but more about being where you can exchange ideas and get skilled people for your projects.

“Blueseed is a fantastic idea,” he added. “You could go there and be very close to the mecca of the tech scene.”

What do you think?

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