debbiegage

Dr. John Paglia of Pepperdine University is in Silicon Valley today talking up his new project on private capital markets. He's trying to figure out the real cost of capital to businesses, especially mid-market businesses, where data is most scarce. (Paglia also runs a business appraisal practice). He thinks business owners routinely under-estimate the cost of their capital, but in doing his survey, he's turned up some interesting data on investors too. One thing that struck him was how many venture capitalists claim they invest by "gut feel" --

Both Twitter and LinkedIn are said to be valued at around $1 billion by their venture capitalists. The Twitter figure originates in a recent TechCrunch report, while LinkedIn was priced by former CEO Dan Nye last year. Note that Nye's valuation came before he left the company in a shakeup that had LinkedIn founder Reid Hoffman seizing control again and bringing in an interim president from Greylock, one of LinkedIn's investors. Yes, Twitter and LinkedIn are both social networks, but the similarities end there. Nye last year claimed LinkedIn has been profitable since 2006, while Twitter doesn't make money. (One source said Twitter co-founder Biz Stone had no clue how Twitter was going to make money when he started the company, and that was part of Twitter's charm for investors -- Stone seemed so excited just by the idea of Twitter).

The alternative was a trial, but the California Court of Appeal said Friday that it won't review the trial court's order to compel arbitration in this case until after the arbitration is finished. Translated, that means Exigen and its founder Greg Shenkman have dodged a bullet, at least for now.

Clean tech is in the news today, with Obama calling for a global treaty on climate change, A123 raising its IPO price range, new funding for a couple of startups that make buildings more energy efficient, and a clean tech acquisition. Serious Materials -- which makes windows, commercial glass and drywall -- raised $60 million in a Series C round led by Mesirow Financial Capital and including seven other venture firms, bringing total funding to $120 million. One of the funders, Foundation Capital, incorporated some of Serious Materials' products last year into its new Menlo Park headquarters, an older building that it renovated so it could show clean tech startups it was serious about being green.

Scribd was sued Friday in federal court by Elaine Scott, who describes herself as a "successful children's book author" and the author of Stocks and Bonds, Profits and Losses: A Quick Look at Financial Markets. The book is 25 years old and is available on Amazon for 39 cents -- or on Scribd, apparently, for free, where Scott claims it's been downloaded more than 100 times. Scribd does have a copyright management system, and a potentially lucrative deal with Simon & Schuster to sell 5,000 of their titles electronically. But Scott complains that authors who use Scribd's system have to agree not to hold Scribd liable, even if the system fails. Not that Scott has ever used it -- Stocks and Bonds wasn't licensed to anybody, she says. Her complaint (uploaded onto Scribd) after the jump:

Venture capitalists and clean tech executives will no doubt watch closely this week to see how A123's IPO goes -- if it happens and it does well, other clean tech companies may be bold enough to follow -- but as taxpayers, you and I have more at stake. A123 has raised a whopping $600 million in government grants and loans for its rechargeable lithium ion batteries -- over half of it this year. There's a $249 million Department of Energy grant courtesy of the 2009 American Recovery and Reinvestment Act, and $100 million in refundable tax credits from the Michigan Economic Development Corporation. Both hinge on A123's plans to create jobs by moving some manufacturing to the U.S. Private investors, meanwhile, including GE and Conoco Phillips, have kicked in about half that amount -- $352 million. Financial backers are going to have to trust that A123 executives can sustain a strategy that has changed radically in just the last couple of years.

Foundation Capital's Rich Redelfs competed against Intel for years before he became a venture capitalist, most recently as the CEO of Atheros Communications, a Foundation portfolio company that makes wireless semiconductors. He thinks Intel's monopoly, along with the Microsoft-Intel duopoly, is finally eroding for good, and he's investing accordingly. The software of choice for servers isn't Windows anymore, he says -- it's the open-source LAMP stack (Linux, Apache, MySQL and Perl/Python/PHP) -- and when Intel processors aren't running Windows, they have to compete on performance like everybody else. The same goes for Intel in netbooks, which started out running Linux. More specialized processors that are not made by Intel are also going into PCs to handle digital cameras, audio and video, Redelfs explains, "and that hurts Intel because they'd rather have their processor running all the apps."

One of the most interesting part of going to TechCrunch 50 this week, at least for me, was listening to seasoned investors ask tough questions of young, inexperienced entrepreneurs. “Mike (Arrington, of TechCrunch) said I was harsh,” Y Combinator co-founder Paul Graham told TechCrunch writer Sarah Lacy after his panel, sounding surprised. “What I want to know is, how does it all work? What’s the insides? “You have to ask a lot of questions, and people never seem to answer all of them. When you’re asking people a whole bunch of questions, you seem mean. I wasn’t sure whether we were supposed to act like we really meant it.”

Two years after stepping down as the CEO of Adobe, Chizen tightened his relationship with Voyager and became a partner. He had his pick of VC firms, he said, but he thinks Voyager is best positioned for the new, shrinking world of venture capital. It makes small investments -- $1 million to $2 million initially, $10 million to $20 million total -- that don't require a $500 million IPO to get a return. "We're not going to be seeing many of those in the future," he said.

Mohanjit Jolly -- who started his career as an aerospace engineer and ended up working at Garage.com -- moved his family to Bangalore two years ago to oversee DFJ's investments in India. He inherited around ten portfolio companies and has since added eight more. He's also hired three people. "It's very difficult to manage a growing portfolio halfway around the world remotely," he says. "DFJ [which had been investing in India since late 2005] realized that." U.S. investors have underestimated the cost of investing in India by about a factor of three, he explains, because they don't realize the challenges that Indian companies have.