After a miserable H1 2008 for exits, Clean Tech companies are breaking the ice and filing for IPOs, including a number from the East Coast:

• First Wind, a Newton, MA-based wind farm developer who are going to be listed under the ticker WNDY (S-1 Filing)
• STR Holdings an Enfield, CT-based maker of solar panels (S-1 Filing)
• A123 Systems a Watertown, MA-based, maker of rechargeable lithium-ion batteries (S-1 Filing)

It’s nice to see the activity. I’m still taken aback by how quickly things ground to a halt (graph from this XConomy Article):

The part stopped abruptly in 2008.

There’s a Globe article on the founders of Paragon Lake (who just raised $5.8m series A) and Highland’s Summer@Highland Program: Incubator Polishes Gem of an Idea. It’s great to see these kinds of programs. I’ve always felt that the East Coast is a great community for entrepreneurs who are somewhat established, but it can be hard to get into for people who are fresh out of school with no ties to the industry. This this means many of the great entrepreneurs that come out of MIT, Harvard, and other schools end up going West; Facebook being a recent, very visible example (and Microsoft being a much older one).

In a somewhat outdated study looking at the semiconductor industry by BankBoston (that alone places it in the three year span post-Baybank and pre-Fleet), the authors found that most MIT-based founders created their firms elsewhere:

More than 50% of the MIT-related companies are located outside the Northeast. These companies have a major presence in the San Francisco Bay Area (Silicon Valley). The five states benefiting most from MIT-related jobs are California (162,000), Massachusetts (125,000), Texas (84,000), New Jersey (34,000), and Pennsylvania (21,000).

It does seem like the community has been changing and the stodgy attitude is starting to change and become more inclusive. There’s more and more completely open forums and meetups (WebInno et al) which are being embraced and a more open community, in general of entrepreneurs.

Massachusetts was the top state in the Milken Institutes’s 2008 Science and Technology Index.  The top five are:

1. Massachusetts
2. Maryland
3. Colorado
4. California
5. Washington

It was also #1 in their last two studies, from 2004 and 2002 (no idea why they didn’t do one in ‘06).  From their interactive maps, the two big categories they use which Mass cleans up in are per-capita small business grants (SBIR and STTR) and the percentage of engineers and scientists in the workforce.

I was at the ICA last night for the opening of a new exhibition by Anish Kapoor. He spoke beforehand about his process as an artist, which was fascinating to hear; he’s a very compelling speaker.

Software builders share with artists share the problem of trying to create something when everything is possible. Anish talked about this issue and how, early in his career, he would not let himself to not work on any object for more than 24 hours. This artificial limit freed him from worrying about creating the perfect object, as well as forcing him to generate a lot of ideas.

Anish was also asked about how he approaches starting a new work, how he first puts chisel to granite, especially in light of so much tradition and history that’s gone on before, and he gave a great response:

Every material, every problem is an old problem. The question is how do you solve it in a new way. -Anish Kapoor

It reminded me of a discussion I had in January on as part of an MIT TechVenture panel for students interested in enterpreneurship. A number of the questions were around how to find that perfect idea for a startup. I proposed that finding an idea for a startups isn’t hard and any student in the room would be able to generate good ideas and, more importantly, good problems, if they sat down and tried. I recommended buying a notebook and simply trying to come up with as many good ideas as they could over the next month, and that they’d be surprised where they ended up.

One Idea Per Page

After the conference, I wanted to prove this to myself, so I did exactly that. I bought a Small Black Notebook and each night would spend about 15 minutes working on some ideas. I added the constraint of putting one idea on each page. This forced me to focus on getting down one good idea, putting aside the 20 related ones. Like Anish’s rule of not working on something for more than 24 hours, I found this freed me to think more creatively.

The first thing I learned very quickly was that sitting down and trying to come up with ideas was a terrible way to do it. I never actually came up with any new ideas while sitting in front of the notebook. They usually came while I was doing something simple like making coffee, walking to the T, or cleaning my house. However, having a notebook and the habit of writing in it each night meant that when ideas came, whenever they came, I’d make it point to remember them and work through the details that night.

Problems Not Answers

A second pattern that emerged in my notebook was that I was able to come up with a lot of ideas that were answers without an established problem. While, in each case, I could create a problem, the problems were ones that either hadn’t been solved before or weren’t recognized as interesting unsolved problems. These were easy to come up with and were usually the worst ideas. It’s hard enough to get customers to buy your solution; also having to first convince them of the problem is real is a Bad Idea.

The better ones were the ones for which I started with an old question, usually one that had been solved, and tried to solve in a much better way. Often these ended up with ideas for companies that don’t make sense for me to be involved with. While playing squash, for example, I had an interesting idea for sneakers. I’m not interested in learning enough about the sneaker industry to make it real, but I found myself obsessed with it for days, searching the web for information about materials and how to find a good supplier (if you’re looking, East Coast-based startup Panjiva is where to start).

After a month of keeping my notebook, I had convinced myself that it’s not that hard to come up with ideas for startups. My notebook was full and while most of them were junk, half a dozen were interesting and two or three were ideas that would make for good companies. But ideas are the easy part.

I don’t believe in anything that will happen more than two years from now.

I’ve come to refuse to accept any argument for a technical or product decision that’s based on something “in the long-run”. The long run doesn’t exist. Our industry changes so fast that any decision is meaningless without a time scale. Is porting to the iPhone a good idea ? It’s a useless discussion to have unless it’s grounded in a time frame. Three years from now, the phone market will be completely different. Google will own it, or Yahoo, or maybe phones will die and hip technocrats will all have little, wireless-enabled devices made by ASUS and use Skype to talk to each other. Or maybe it will be shown that cell phones cause brain tumors and everyone will have suddenly ditched them. Who knows.

In addition, even if there aren’t significant technological or market changes, three years from now, your team will have been working away for three years. That’s three years worth of code, three years worth of product thinking and investigation, three years of sales cycles, and three years of team members being hired and leaving. If the product is at all innovative, it will have a different architecture, different marketing strategy, and, it probably does a whole lot more than it used (if it doesn’t, you’ve got much bigger issues).

You can’t predict beyond your event horizon

For every organization, there’s a point beyond which prediction is meaningless. If you’re a newly-formed startup, it might be as few as six months. An enterprise software company with a few dozen customers; probably a year or so. Beyond this point, there are so many unknowns, each of which is interdependent with the others, that it’s impossible to see beyond them. Any discussion of architecture or technology choices or features beyond this point is useless.

This isn’t an excuse to be less rigorous or to ignore strategic thinking in general. As software is built, it’s needs to be well-factored and structured so that, no matter what happens two years from now, you’re in a good position to adapt. You don’t want to be the company whose product takes off and isn’t able to keep up with the tornado (*waves to Friendster *). But there are many fewer cases of companies’ technology not being able to keep up than those that have gone out of business chasing problems that exist only in alternate realities they never got to.

And, focusing on a set period of time, gives you a window in which to adjust. Once there’s a real chance that your product will take off within the next 6 months, you’ve got 6 months to get ready for it, in a real concrete way, and are likely to execute much more effectively as you’re not worried about where you’d like to be 2 years from now; save that for when you’re larger and can actually predict two years out.

You can’t predict, so enjoy the ride

Once you’ve accepted this, technology and product decisions become much easier to make as each one is grounded in a concrete time frame. There’s only so much that can be done in 6 months, so your starting point can be “if the whole team focused on this one thing for 6 months, where would we want to go ?”, which gives any discussion an immediate level of focus and scope.

PowerSet came out of super-secret beta this week with much buzz. As someone who works on search software and thinks about similar problems all day (albeit in a different domain), I have to admit I was excited to try the company that “has Google scared”.

I tried it and I don’t get it. They may be doing some crazy NLP/semantic web voodoo behind-the-scenes, but I can’t see any way it’s actually making the experience for users better.

Their relevance ranking feels worse than Google, Yahoo, et al. And the only additional feature is that, for certain searches, it will display Factz (sic) which are basically articles it’s pulled out of Wikipedia or Freebase. Only a small subset of the searches seem to have any Factz (sic) and they aren’t that helpful.

It ends up being a poorly-implemented version of what others like Exalead or Hakia already do. Or what a hacker could do in a weekend by putting Freebase and Wikipedia into Solr.

However, they do have good facial hair:

With a blog named “Right Coast Tech”, I feel compelled to comment on XConomy’s article Is Boston Venture System is Losing More Ground to the West Coast ?

This is not the first and won’t be last “East Coast Vs. West Coast Venture Scene” article. The problem I have with all of them is that they’re answering the wrong question.

Strawberry is Much Better

They remind me of the Boston-New York arguments that inevitably happen when a New Yorker comes to Boston. New York has much better nightlife, is much bigger, and has better bagels. These are facts, not arguments and miss the point. If you care a lot about bagels, clubbing until 3 am, and being surrounded by 8 million people, then you’re going to like New York. Boston has more history, is a short drive to the suburbs and nature, and is much smaller. If you like walking the Freedom Trail, hiking in the mountains, smaller cities, and not being surrounded by tons of people all of the time, you’ll like Boston. Arguing about which city is “better” is as interesting as arguing over chocolate or vanilla ice cream.

The West Coast VC ecosystem is bigger, which means you’re exposed to many more ideas, people, and VCs. That’s a fact. There’s pros and cons to this. Having access to many more co-founders, employees, and potential investors is a benefit. On the other hand, you’re competing with many more entrepreneurs. Additionally, being exposed to more ideas is not necessarily better. A case can be made for over-stimulation. An entrepreneur only needs one idea. Having 3,000 doesn’t help and, in fact, it’s likely to hurt. Warren Buffet lives in Omaha for a reason. That said, there’s plenty of other great investors who thrive in New York.

It’s Irrelevant as All Ice Cream Is Good

An entrepreneur should use an approach for networking, raising money, and hiring that fits the ecosystem in which she’s operating. But that’s true of a number of variables besides size. Like the economy for example: if times are tough, one should be more conservative in financial projections of burnrate and when to raise capital.

More importantly, a good idea and a good team is going to do great things in any venture ecosystem in any economic time. If Boston’s scene has no growth over the next 5 years, it will still be good for a variety of reasons and still a great place to launch a venture.

The Globe is running an interesting article on Georges Doriot, entitled Venture capital’s grandfather that’s an interesting read. It mentions the book Creative Capital by Spencer Ante which is in my ever growing list of books to read.

The startup world moves so quickly that I really enjoy pieces like this one which put what we do into a larger historical context. It’s useful to keep in mind that the world has only worked the way it does for a very small period of time.  And it’s unlikely to keep working that way for much longer.

Ten years from now, it’s possible most of the traditional, stodgy VCs will have been replaced by an ecosystem of startup development ‘Microfunds’ like Y Combinator, Tech Stars, or Highland’s Summer at Highland. Or maybe not. Hard to predict exactly what will happen, but it’s useful to remember how unpredictable our industry is, even at its most basic level.

There’s a great Fake Steve Jobs post entitled Google putting up fence and gate to keep execs from leaving.

I think what makes it really funny is that it’s what everyone has already been thinking. Google has cultivated this image of an idyllic, do-no-evil haven for engineers who are much smarter than you, which makes for delicious schadenfreude watching their stock fall from $700 to $450, their ad click-throughs decelerate, and their high-level executives jump ship for Facebook and now EMI.

Even their own line-level uber-engineers have started to realize that it sucks working there too. And how couldn’t it ? If you’ve bought into the cult of Google and end up landing a job there, it has to be disappointment to show up and realize that it’s still a business with shareholders to keep happy, bugs to fix, and customers to keep happy. And it still has managers, and some of those managers suck. Who knew ? They live in the real world, too.

XConomy.com is running an article about angel groups having a positive outlook for 2008. It’s nice to hear confirmation that in spite of much of the rest of the economy failing off the rails, the startup world is still humming along. Though the pessimist in me is compelled to point out that startup investment usually lags the rest of the economy and probably wouldn’t feel the effects for another 6-12 months.