By Dwyer Gunn – Freakonomics

In recent months, the U.S. government has taken on a challenging and controversial new role: private sector investor. This development has raised a host of questions about the government’s role in the economy and a new book by Josh Lerner, Boulevard of Broken Dreams: Why Public Efforts to Boost Entrepreneurship and Venture Capital Have Failed — and What to Do About It, is required reading for anyone hoping to understand the issues.

Lerner, the Jacob H. Schiff Professor of Investment Banking at Harvard Business School, describes government interventions in countries as varied as the U.S., Singapore, and Israel, and explains the case for intervention. His analysis of successful and unsuccessful programs worldwide ultimately suggests a cautious approach to government intervention that bears little resemblance to the reality of today.

He has agreed to answer some of our questions about his book: http://tinyurl.com/yewavt9

BusinessWeek.com
January 12, 2010 3:39 PM

U.S. Keeps Technological Edge in Trade With China, Mayland Says

From growing soybeans to developing software, America is maintaining its technological edge in trade with China, says economist Ken Mayland.

The article below details the rapid rise of Bing. If Bing were able to become a strong and comparable search engine player, then Microsoft could be compared to when IBM was also able to remake themselves. But, the verdict is yet to be made by a long shot.

TechCrunch
January 15, 2010 9:26 AM
by Erick Schonfeld

Bing Is Growing Faster Than Ever, Keeps Gaining Search Market Share

searchsharedec09

Bing just keeps on gaining market share, and is now growing faster than ever before. In December, Microsoft’s search engine gained another 0.4 percent to capture 10.7 percent of U.S. search queries, according to the latest comScore qSearch numbers. That makes five straight months of steady share gains for Bing since it launched—Bing’s share is up 2.7 percent in total since May, 2009. Google gained only 0.2 percent to end the month with 65.7 percent market share. Meanwhile, Yahoo lost as much as Google gained (0.2 percent) to end the year at 17.3 percent (see table above, courtesy of Barclays Capital, click to enlarge).

What is even more interesting is if you look at year-over-year query growth rates for each search engine. Bing’s growth is actually accelerating. Its growth rate in query volume was 49.4 percent in December, compared to 20.6 percent growth for Google (which was also above the average), and a 1.9 percent decline for Yahoo. Here are the year-over-year query growth rates for Bing for the past few months:

  • December, 2009: 49.4%
  • November, 2009: 46.0%
  • October, 2009: 30.8%
  • September, 2009: 30.7%
  • August, 2009: 31.8%
  • July, 2009: 15.6%
  • June, 2009: 11.6%

Barclays Capital analyst Douglas Anmuth attributes Bing’s gains to “advertising, OEM partnerships and toolbars, & Bing cashback.” He also notes that Yahoo’s decline was due “almost entirely” to the loss of some toolbar deals, specifically HP to Bing and Acer to Google, which weren’t particularly profitable anyway. But Yahoo’s core search volume growth is decelerating, which is a concern for investors.

And while Yahoo lost 0.2 percent share, that is less than the 0.5 to 0.8 percent losses it incurred in each of the previous three months. He notes that since Bing’s launch, Yahoo has lost almost as much share (2.8 percent) as Bing has gained (2.7 percent), a trend we’ve seen from the very beginning.

Note: This data is based on comScore’s qSearch, which estimates the actual number of search queries for each search engine, including ones which go through toolbars and related sites beyond the main search site. Data from Nielsen and Hitwise show different trends, with Bing actually falling in December, but they measure market share differently. Most Wall Street analysts report the comScore numbers, and they are the metric we track most regularly.

Crunch Network: CrunchBoardbecause it’s time for you to find a new Job2.0

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Fast Company
January 12, 2010 8:09 AM
by Laura Rich

Why You Should Start a Company in… Boulder

It used to be, if you were serious about starting a tech company, you went to Silicon Valley. But emerging entrepreneurial hubs around the country are giving startup aspirants options. In this series, we talk to leading figures in those communities about what makes them tick.

Boulder, Colorado

When Brad Feld moved to Boulder, Colorado, in 1995, he found a college town that was best known for its rock-climbing and meditation centers. Using a pile of cash from two acquisitions, Feld pioneered a thriving startup scene that now includes 171 fledgling companies (and a city campaign that proclaims "Boulder is for startups"). The Foundry Group, the venture firm that Feld founded, reigns as Boulder’s biggest software and Internet venture capital firm, having fostered entrepreneurial growth through organizations like the incubator TechStars, and investments in local companies including Social Thing and Lijit.

Boulder’s current entrepreneurial ecosystem boasts relocated second- and third-generation entrepreneurs like Kimbal Musk, who with his brother Elon (now of Tesla), started and sold Zip2 and PayPal, and now runs real-time search engine OneRiot. And a few startup junkies like the 25-year-old Andrew Hyde, who has launched four companies, including workshop outfit Startup Weekend, which has toured 52 cities around the world. One of Boulder’s most recent entrepreneur transplants, Joe Stump, left a prestigious position at Digg to launch software firm SimpleGeo in Boulder. Colorado-born tech firm MX Logic, which helped build an Internet-era talent base with its email services business, sold this year to McAfee for $140 million. And one of Feld’s investments, Service Metrix, sold for $280 million in 1999, giving Boulder one of its biggest exits.

Feld spoke recently with FastCompany.com about what makes Boulder’s startup scene unique. What did we unearth? Boulder, CO is a small, highly networked city inhabited by active life-styled, serial entrepreneurs. Brad Felds lays out, in great detail, an entrepreneurial ecosystem that may have the right mix ingredients to be a startup capital.

How would you describe Boulder’s startup scene?

I moved here 15 years ago from Boston, and when I moved here I didn’t know anybody, which is a useful reference point, which is that Boulder is a reasonably small town. It’s 100,000 people, not including the college kids. It’s another 25,000 college kids. It’s a pretty small number of people, but it’s an extremely high concentration of computer science people and PhDs. I think the stat that gets thrown around is that on a per capita basis we’re no. 1 in both of those. That’s important because what happens is you get a very significant concentration of smart people who use technology in their day-to-day work and combined with a very independent personality. It’s a hippy town. My joke about Boulder is that the hippies ran out of gas on their way to the Bay Area and just said, "Eh, I’ll stay here, it’s pretty." So you sort of have this very independent, high concentration of smart people, combined with sort of a sense that the integration of what you do in work and life is important.

What’s happening in Boulder’s entrepreneurial ecosystem that makes it sustainable?

I think one of the things that makes Boulder special is that you have this larger percentage of people willing to engage in the entrepreneurial community, and that integrate into their life very effectively, versus it becomes this thing that they do for a period of time and then need to go have a life, but still want to be in the same place. Those two things sort of work together.

So, that’s thing one.

Thing two that I think is special is that there’s very little friction here. There’s no commutes; we’re living in a world where it doesn’t matter whether you’re sitting at your desk in your office, you’re sitting in your home, you’re sitting in a coffee shop, you can get work done. Especially with software and Internet-related things, you’re always connected, and as a result, the integration and probably the ability to sustain a level of intensity that’s required is higher.

There used to be a rap on Boulder that people didn’t work very hard. Five o’clock and you’re out on your mountain bike. The problem with that is, and it’s true in other cities that are really high quality of life cities. Yeah, you’re on your mountain bike from five to seven then you’re back at your desk and you’re back in front of your computer at eight and then you work until one in the morning. And you see it within the entrepreneurial strata. I mean, it is not bad to go out for a run in the middle of the day, or a bike ride–because everybody that’s in the entrepreneurial community is working their 12- to 15-hour day day in and day out. And they’re just not working between nine and five. They’re not organizing their day around the morning and evening commute, or whatever those bookends of the natural twelve-hour entrepreneurial day are.

So that’s a big part of it.

The last sort of Boulder differentiator, which I think is really important, is that because of the size of Boulder, it’s big enough to be interesting, but not so big to be overwhelming. It ends up being extremely collaborative place. We’re probably in our third or fourth generation of entrepreneurs here. The most interesting thing about this most recent wave is that first of all there are a lot of people who made a lot of money in the pre-bubble time frame. So you had a lot of successful entrepreneurs who made meaningful amounts of money. That’s important.

You have a lot of those entrepreneurs that had a success. Wasn’t necessarily their first company, but they had a success. And then, they had a failure between the 1998 and 2003 timeframe. So they started another thing or made some investments that got caught up in the bubble. So they had both a success and a failure in that time. So some set of those people started companies from 2004 forward. They were very mature entrepreneurs. They’re entrepreneurs that had success AND failure and understand what was required to both win and also were humble enough to recognize that you could lose. So you had that against a backdrop of, everybody here is at most two degrees of separation away from any other entrepreneur, because there’s only 100,000 of us, right? And that then is great because what you have is this easy access to everybody. And even though there’s competitive dynamics and occasionally friction, and there’s plenty of personalities. More generally, you tend to see that people try to help each other here, especially around the thing that I think is the generator of new entrepreneurial activity, which is young, first-time entrepreneurs.

Does Boulder breed or attract entrepreneurs?

Welcome to Boulder

I think it’s some of both.

I think the core personality in Boulder is an entrepreneurial personality. It’s an independent, hippyish, smart, counterculture place. And those are more entrepreneurial than less entrepreneurial attributes. So I think you start with that.

I think you have an acceptance in this community of both independent thought, as well as a very high comfort level with ambiguity and failure. So if it’s not clear what you’re doing, you’re still very welcome here. And if you’ve had failure, you’re still very welcome here. So the environment is one that’s very comfortable with that.

The other thing which is really useful is smart people attract smart people. Independent people attract other independent people. Progressive people tend to attractive other progressive people. So the entrepreneurial lifestyle tends to attract other entrepreneurs. And I’ve seen that over 15 years in a very reinforced way.

You said recently that good cities for entrepreneurial incubators have "good bones and a chip on its shoulder." What did you mean by that?

They’re separable but both important. So the good bones concept is: You have to have smart people. You have to have an independent streak, or a culture of independence. You have to have a steady supply of new young people into the community. Because if you don’t, what happens is everybody gets older, has families, changes their priorities. And you have this stagnation until the younger people get sick of the older people not doing anything. So you need to sort of have this steady stream.

You have to have some relevant wealth. So, you know, whether it’s angel or VC investors, having people that have made money from things that are currently being started is important. If you have a bunch of people who made money in real estate, it’s gonna be really hard to build a tech community.

The chip on the shoulder is interesting. I mean, there’s only– The whole Silicon Valley phenomenon is so telling because many major and many minor cities in the country became "Silicon Something"–Silicon Prairie, silicon this, silicon that, Silicon Mountain, Silicon Rabbit, Silicon Elephant. Which is so ironic because silicon is a proxy now for software because Silicon Valley was started because of the chip companies, so it’s even a moniker that doesn’t quite work. The cities that have a little bit of a complex, like, "We can be better," is a motive because that galvanizes people to action. And my comment consistently to people is not to be like Silicon Valley because you’re not gonna succeed at that. The goal is to be the best you can be of yourself. Learn as much as you can from Silicon Valley and other cultures, but if you’re Boulder, be the best Boulder you can be. If you’re Boston, be the best Boston you can be. So going back to the first comment , use your bones and build something meaningful on that. And then you have more opportunities. Versus so many companies that say here are the three things we’re gonna do: A, B, and C, and here’s our game plan. And that happens for a year or two and then everybody gets bored or they don’t work.

Is Boulder the right context for entrepreneurs with an eye on the kind of billion-dollar exits you see in Silicon Valley?

I think that’s a population dynamic. I’m not a believer that you’re not gonna see billion-dollar exits here. I’ve had one. A company called Service Metrics, was bought for $280 million and by the time we got our hands on the stock after the deal closed it was worth well over a billion dollars. So, that was 1999. So you could say that’s a bubble exit so take it out of the equation. But Verio was a $5 billion sale, and that was a company that was created here. Not in Boulder, but in Denver, so in this region. The argument that there are none doesn’t work for me. On a percentage basis, I don’t know if it’s the same or not. But on an absolute basis, we have way less companies. Almost by definition it’s gonna be less. Oh, by the way, the vast majority of exits aren’t billion-dollar exits anyway. So it kind of comes back to, most software-Internet companies get acquired. We will have that play out here. That will continue to play out.

What does Boulder still need for the entrepreneurial ecosystem’s success?

I think there’s been a ton of energy by entrepreneurs in energizing Boulder in the last four or five years. And that has to continue. There’s no such thing as resting on your laurels. There’s no such thing as being complacent. The entrepreneurial beast is hungry. And if you want to have a great entrepreneurial ecosystem you have to keep feeding the entrepreneurial beast. And it has to be fed all up and down the chain, from some entrepreneurs who are young to experienced entrepreneurs, and they have to keep caring about the place they live in, their community, and the dynamics amongst them, the people in the community.

There’s not a thing we need, but that’s a thing I’d be fearful of. Not about Boulder specifically, but about in general. It’s easy to say, "Look how good we’re doing." So what. That’s a good way to get to a place where you’re not doing so good.

Laura Rich is a freelance writer and co-founder of Recessionwire.

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Do Private Equity-owned Firms Have Better Management Practices?

Authors: Nick Bloom, Raffaella Sadun, and John Van Reenen
Publication: Chap. 1 in The Global Economic Impact of Private Equity Report2009. Globalization of Alternative Investments: Working Papers Volume 2, 1-23. Geneva, Switzerland: World Economic Forum, 2009.

Read the report as a PDF:http://www.weforum.org/pdf/cgi/pe/Full_Report2.pdf

How to Bounce Back from Adversity

Authors: Joshua D. Margolis and Paul G. Stoltz
Publication: Harvard Business Review 88, no. 1 (January-February 2010)
Abstract

The article focuses on how companies can be managed to overcome adversity with resilience. The characteristics of resilient managers who provide leadership for their teams and can build resilience in their employees are discussed. The manager’s ability to shift from cause-oriented to response-oriented thinking depends on the four perspectives or lenses controlling the factors causing the crisis, impact of management’s actions, breadth of the crisis, and duration of the situation. A resilience regimen of questions that managers can use to reframe negative events and understand their thought processes is explained.

Read an excerpt: http://hbr.org/2010/01/how-to-bounce-back-from-adversity/ar/1

TechCrunch
January 12, 2010 8:00 AM
by Jason Kincaid

VigLink Raises $800K To Take Hassle Out Of Affiliate Programs

viglinklogo.pngMost online publishers are at least vaguely familiar with affiliate programs, which can help them generate revenue from the stores and products they link to. Unfortunately, actually managing accounts with these programs can be a bit of a pain, and many people simply forget to use them. VigLink is a new startup that’s looking to help by automatically inserting affiliate links whenever you link to a product from your site. The company has just disclosed a $800K funding round it raised last summer that was led by First Round Capital and Google Ventures, with a number of angel investors including Reid Hoffman, Dipchand Nishar, Niel Robertson, Hadi Partovi, Ali Partovi, Carlos Cashman, and Micah Adler.

For those that aren’t familiar with them, affiliate programs are often offered by online retailers who pay you a commission to drive traffic (and purchases) to their webstore. Amazon is best known for their program, but many other businesses now feature them as well. VigLink looks to help you use as many as these programs as you’d like with a minimal amount of effort. The site is currently in a private beta, but plans to launch publicly in the next few months.

To start using VigLink, publishers simply drop a snippet of JavaScript into their pages. Then, whenever the publisher links to a valid product (say, some shoes on Amazon), VigLink will automatically convert that standard link into an affiliate link. The publisher still determines which stores and products they’re linking to — VigLink simply modifies that link to include the proper affiliate program URL.

viglinklogo-1.png

VigLink further streamlines the process by maintaining its own account with these affiliate programs, and any publishers using VigLink are housed under these accounts. This makes it relatively easy for a publisher to get started (they don’t have to sign up for anything other than their initial VigLink account). But I’m not sure it’s a foolproof setup: if one publisher using VigLink starts behaving badly, there’s a chance that the affiliate program being abused will ban the entire VigLink account, which would affect all publishers using it.

CEO Oliver Roupe says that the company is being as transparent as possible with affiliate programs to make sure that doesn’t happen. He also says that VigLink has a system that constantly monitors its publisher sites for spam, even long after they’ve signed up for the service (he likens it to the system Google’s AdSense uses).

VigLink generates revenue by taking a percentage of the affiliate fees it generates (the company hasn’t settled on an exact amount yet). Roupe wouldn’t comment on any features that are in planning stages, but I suspect that they’ll eventually help publishers monetize by suggesting when they should insert affiliate links at logical places in their blog posts (say, when they mention a product). Likewise, VigLink could potentially offer a feature that would poll all of the affiliate programs in its system before inserting an affiliate link to determine which one would generate the most money for the publisher.

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