It has been a while since I blogged about TED, but I’m going to try to post some thoughts over the course of this week. There are always nuggets of wisdom I collect throughout the TED conference. And they often come from the most unlikely sources. Perhaps this year that wisdom will be dolled out by Sarah Silverman or Temple Grandin, David Byrne or Nathan Myrvold, James Cameron or Benoit Mandelbrot. Rest assured, whoever the source, there will be wisdom dolled out. And, with any luck, I can be the conduit for some of that TED wisdom.

I think this is my 10th TED. Why do I come back to TED year in and year out? Not only do I find it inspiring to learn about the trials and triumphs of some of the great thinkers of our day, but I find their diversity of background and opinion invaluable. Many of the most interesting innovations throughout time have been the result of cross-disciplinary collaboration. The same is true of the innovations of today — they draw upon a diverse backdrop of technology and leadership. TED inspires me to think more broadly about the world in which we live (how art and science and philosophy come together) and helps to place the companies with which I interact every day into the larger technological and economic universe.

Like so many of you who watch the TED Talks in amazement, I attend the TED conference in amazement and am constantly inspired. I consider myself very lucky to have the opportunity to interact with such a transcendent group of people. I will do my best to share some of those moments of inspiration along the way.

Source: Global Household Leverage, House Prices, and Consumption, By Reuven Glick, and Kevin J. Lansing

No one is complaining about Yang’s favorite pastime anymore. Tonight, Redpoint announced it has just closed a $400 million fund, reward in part for a number of the envy-inducing exits it saw last year, at the height of the worst recession in decades, including: the October sale of WiChorus to Tellabs for $165 million; the November sale of LifeSize Communications to Logitech International for $405 million; and the December IPO of network protection company Fortinet. (Redpoint owned 12.4 percent of its shares after the offering.)

Redpoint portfolio companies Calix Networks and Solyndra have also filed to go public, though they’ll both need big boosts from the markets for its backers to see meaningful returns. Calix has raised $272 million and Solyndra has raised $512 million from investors.

Redpoint’s newest fund is its fourth early-stage vehicle. While it is still awaiting returns on its third fund – it closed in 2006 with $400 million –its second fund, a whopping $1.25 billion fund that closed in 2000, has enjoyed a number of hits. The aforementioned are among them; so was Intermix Media, an L.A.-based company whose chief asset was a little site called MySpace that News Corp. bought for $580 million in 2005.

Yang tells our colleagues at Reuters that the firm first approached investors last fall and that it closed the fund without being able to accommodate all the LPs wanting a stake.

 ”We were prepared for a much tougher environment based on all the horror stories we had read and if you look at the macro conditions,” said Yang.

The new fund will continue Redpoint’s focus on social networking, as well as be used to back mobile computing, cloud computing and clean tech startups.

An alternately sober-minded and gibbering mad – but never boring and mostly riveting — hour-long what-would-you-invest-in panel with Nassim Taleb, Marc Faber, Hugh Hendry and others from the just-completed Russia 2010 conference:

When the girls were away, the boys set up a scary ambush for their guests with a scorpion taped to the door, and a robot sentry grooving to Crystal Method’s High Roller.

The girls were not impressed.

Since we were waiting in the dark for them to come through the door, I filmed through a night-vision-goggle toy, and with a bit of telephoto, it worked OK.

Published by scientists at the California Institute of Technology in Pasadena and at University College of London, the research centered on two women with Urbach-Wiethe, a disease that damages the amygdala, an almond-shaped part of the brain linked to feelings of fear and aggression. While it’s generally the case that people are risk-averse, even when facing a potentially big gain — they prefer holding on to what they have, rather than risking it to trade up — the women with Urbach-Wiethe were more reckless, willing to gamble with abandon no matter their chances of a positive return.

“We think this shows that the amygdala is critical for triggering a sense of caution toward making gambles in which you might lose,” said one of the researchers in a statement.

To reach their findings — published in the multidisciplinary journal Proceedings of the National Academy of Sciences – the researchers compared the responses of the women with Urbach-Wiethe with those of 12 volunteers who have “normal” undamaged brains.

Lots of little things go into building a great company over the long term.  Rally Software is one that I’m proud to have been involved in from the beginning.  I remember when Ryan Martens, the founder, would sit for entire days in a small conference room near my office covering the white boards on the walls with his scribblings.

Today Rally is a 150 person company that plans to add another 75 people in 2010 on the heels of Rally’s $16 million financing led by Greylock.  And – since their birth in 2002, Rally has had 17 babies (well – people that work for Rally have had the babies, but you probably figured that out.)  Recently, Rally’s leadership team decided to do something about this.

Nicely done Tim, Ryan, and everyone else at Rally.  Now you’ve just got to get these kids using software from Kerpoof at an early age.  I wonder how Agile Parenthood works?

Q&A: View from the top with Tony James. (FT)

New Investors Topple Masters of the Universe: Asian sovereign wealth funds and venture capitalists, rather than big firms of the past, were the most active investors last year (Wealth Bulletin)

Update: The Kleen Energy plant explosion has claimed five identified casualties. The company, backed by Energy Investors Fund, won Goldman Sachs a Deal of the Year award from Project Finance. (Courant.com)

Watch Your Backs Guys: Four pensioners have appeared in a German court charged with kidnapping a financial adviser they blamed for making rotten US property investments. (BBC)

Tired of Complaining Customers? Ban them! That’s what Tim Horton’s, which happens to be owned by none other than Sun Capital, did! (CBC News) (PS: To clarify, Sun Capital sold Tim Hortons’ wholesale coffee business to Green Mountain earlier this year and sold its retail business to own of its own affiliates.)

I Protest! Generation Y is apparently too lazy and unfocused to be hired, according to a reporter who spoke with three random people who work in the HR industry. (Courier-Mail)

Not So Simple: While raising taxes on PE and VC firms seems inevitable, critics argue that raising the taxes paid by the private equity industry will also hit small partnerships and venture capital, and may not even raise as much revenue as governments hope. (Reuters)

Lex: On Bank Private Equity (FT)

This is part of my ongoing series on Raising Venture Capital.

I often tell people that raising money is worse than getting married.  I have to be careful in how that sounds because I love my wife and am happily married.  But the truth is that in marriage if you’re unhappy you can at least get divorced (in most countries).  Not so in venture capital.  You’re tied at the hip to your VC.

So my first advice is not to rush in the fund raising process.  Get to know VCs over a long period of time so that when you’re ready to get engaged you feel you know their character.  As in real life – those that rush into marriage often find out what their partner is really like after the fact.  I wrote a post linked as follows about how to build relationships with VCs over time.

But what about once you have a term sheet?  How do you then reference check your VC to be sure that you’ve chosen a good firm and partner?  First, I would say that most entrepreneurs do almost no reference checks or at least do them very informally.  Don’t let that be you.  Most VC’s will happily supply you with a list of CEO contacts of the people who will speak to you about working with them.  Don’t be afraid to (politely and respectfully) ask for this.  In fact, they will think better of you because you’re demonstrating that you’re the kind of thorough person that they wanted to invest money into in the first place.

Don’t stop there.  This list is the equivalent of the reference list that you’d give your VC (or any other potential employer if you’re interviewing for a job).  What I mean is that this is the “friendly” list.  The one where they HAD BETTER say good things about you because if they don’t then you’re really messed up for not suggesting the right people and calling them in advance to control the process and make sure that they say good things.  Good recruiters never stop at the official list and neither do VCs.

For some reason most entrepreneurs do.  Don’t let that be you.  I always tell entrepreneurs, “in good times of course everybody loves their VC.  They made great introductions, they helped you get financed, the put in more money themselves, they helped you strategically and they helped you with your exit.  It’s an effen love fest.”

BUT (and there’s alway a but …) what were they like when the chips were down?  When the world was ending?  After Sept 11th?  After Sept 08?  After some random date
when you missed your targets, when your co-founder quit, when the competition chose your competitor or when the other investors around the table lost confidence?  Don’t take my advice, take Eric Clapton’s.  Nobody Knows You When You’re Down and Out.  If you’re so inclined click on that link and launch this video while you’re reading the rest of this post.  I love this song.   I’ll highlight the key lyrics:

nobody knows you
When you're down and out.
In your pocket, not one penny,
And as for friends, you don't have any.

When you finally get back up on your feet again,
Everybody wants to be your old long-lost friend.
Said it's mighty strange, without a doubt,
Nobody knows you when you're down and out.

Make sure to call the companies in that VCs portfolio that didn’t succeed.  Feel free to ask the VC after they give you the official list for a list of 3 CEO’s where the company stumbled.  Do a web search to find companies that they didn’t give you.  Ask the CEO’s about the VC when the chips were down.  Do research and find some CEO’s who were fired by the VC.  That would be instructive.  I’ve met some that actually say positive things about the VCs.  I’ve heard others that say the opposite.  You’ll have to sort though how much is sour grapes versus reality but … wouldn’t you rather have all data points?

My story briefly.  My chips were down in late 2000 / early 2001.  I had 5 investors at the time.  That “nobody knew me” was being polite.  Nobody wanted anything to do with Internet companies.  Hard to believe but true.  Except GRP.  They said that they back entrepreneurs who show promise even when the chips are down.  It might sound self serving since I now work here – but there’s a reason I now am a partner here.  They got me through the tough years by rolling up their sleeves.  They did the same with places like Envestnet (now a major success story), UGO Networks (bought by Hearst), Kyriba (left for dead in 2000 and now raising a major round of capital and growing at a fast clip) and countless others.

I’m not saying they’ve backed every company, every time.  Nor that any VC should.  I’m also not saying GRP is perfect or the only VC who rolls up its sleeves when times are tough.  What I’m really saying is, any VC would have had their share of having to deal with companies when the chips are down.  Find those companies and find out the truth.  Better now than when you have kids.

One small hack – go to LinkedIn and do a search for the company name.  You’d be surprised how many ex-founders and ex-CEO’s you can find this way.

Happy reference checking.

We’ve all been sucked into doing something stupid, right? Fortunately, Steven Greenspan has written a book called Annals of Gullibility. In its conclusion he explains how to avoid gullibility, and I’ve provided a synopsis for you. Read the full story at the American Express Open Forum.

More on psychology if you need the advice.

Many of our readers wondered what those words meant, exactly. So we looked for answers from Steven Franklin, head of the tax and venture capital and private equity funds practice at Gunderson Dettmer in Silicon Valley:

President Obama’s words seem straightforward, but eliminating all capital gains on small business investment sounds almost too good to investors to be true. How did you interpret them?

Currently, there’s a tax break for making investments in qualified small business stock. It’s sometimes referred to by the Internal Revenue Service’s existing code section as 1202 stock. Right now, there’s a 50 percent reduced rate of tax off any gain from a qualified small business stock as long as the stock is held for at least five years.

And a small business is defined as…

Generally, that means its net worth falls below $50 million. I’d say the majority of venture-backed investments qualify. So all the president is proposing to do is take the existing legislation, and change the tax rate from a 50 percent reduction to a 100 percent reduction.

So VCs and angels should be thrilled if this goes through the legislative process successfully, right? Are there any caveats?

Well, the big problem is that there’s currently regular tax and there’s alternative minimum tax (AMT) and this reduction in gains [being proposed] doesn’t apply when you compute your AMT tax. So even though today there’s this 50 percent break, an individual with a really big winner that generates lots in gains winds up paying the same amount as if he’d paid the full capital gains rate because there’s no corresponding AMT break. Moreover, there haven’t been any conversations to change that.

So if they don’t change that AMT break, the break is irrelevant right now. But wouldn’t Obama’s proposal push it into meaningful territory?

It would but it’s still an imperfect incentive.

And it’s also just talk at this point.

Well, legislatively, it’s easy to change because they change one percentage in an existing statute. But yes, it would have to go through the House and Senate like everything else.

But you still don’t sound very enthusiastic about the proposed change. Why?

Because from a policy standpoint, the proposal is almost completely neutered by proposals to tax carried interest as ordinary income. The president is trying to encourage people to make more small business investments on the one hand, but on the other, he’s [considering] penalizing the people with the most resources to invest in small businesses. In other words, for GPs, that zero percent tax rate would effectively be overridden, and their tax rate on their venture capital investments would go up, not down.

But no one is really talking about tax carried interest as ordinary income anymore, at least not this year. The Democrats have enough problems right now. So isn’t it possible that VCs could be facing the best of both worlds?

Sure, it’s possible that the carried interest legislation dies and we get that zero percent exemption. But to my knowledge, there’s nothing on the docket right now pertaining to [Obama’s] proposal.

PLC Systems Inc., an OTC-traded medical device maker has hired investment advisory firm Natixis Bleichroeder to help it raise capital and examine “strategic alternatives.”

German cable provider Kabel Deutschland is for sale. Carlyle, BC Partners and Advent are currently in the bidding pool.

Miramax is for sale, and Lionsgate is interested in it. That could change the bidding dynamics of the auction for MGM.

Iteration Energy, a listed Canadian oil and gas explorer, initiated a process to explore strategic alternatives. The company engaged FirstEnergy Capital Corp and Scotia Waterous Inc as co-financial advisors to assist it in this process.

Hanmi Financial Corporation’s Board of Directors authorized the Company’s management team to explore a broad range of strategic alternatives. Cappello Capital Corp. has been engaged as the Company’s financial advisor in this process. Hanmi is parent to Hanmi Bank, which provides multi-ethnic banking services in L.A.

Lloyds is in talks with Advent International and Collar Capital, as well as 3i, for its Integrated Finance unit, formerly part of HBOS.

New Jersey-based Speedus Corp. (Nasdaq: SPDE), engaged Morgan Joseph & Co. Inc. to evaluate strategic alternatives available to maximize shareholder value with respect to Speedus Corp’s subsidiary, Zargis Medical Corp.

T-Mobile USA, owned by Deutsche Telecom, may go public or spin itself off from the unit. (Reuters)

Staffing companies are the latest hot target. “After a series of deals in recent weeks, 2010 is shaping up as the year of mergers and acquisitions in the fragmented U.S. staffing industry .” (Reuters)

FriendFinder Networks has shelved its IPO plans, citing market conditions. FriendFinder runs websites such as BigChurch.com, a site for single Christians, but derives its revenues primarily from its adult-oriented offerings such as AdultFriendFinder.com and Cams.com, according to a prospectus filed with the U.S. Securities and Exchange Commission. (Reuters)

Bankrupt AeroThrust Corp., a Miami-based maker of airplane engines, is seeking buyers but has received no offers and will likely liquidate its assets.

Progenics Pharmaceuticals, Inc., a Tarrytown, NY, biopharmaceutical company, is pursuing strategic alternatives for RELISTOR, including licensing, collaboration, strategic alliances and U.S. commercialization or co-promotion, following termination of its 2005 collaboration with Wyeth Pharmaceuticals, which is continuing manufacturing, sales, marketing, and certain development and regulatory activities for RELISTOR during the transition.

Simmer & Jack Mines, a Toronto-based miling company, is reviewing options for its 37% holding in First Uranium, a company which is also exploring strategic alternatives.

See All Prior Lists Here

Any attempt by a proposer to initiate contact with TRS staff or TRS Trustees, other than as specifically provided in this RFP, may disqualify the proposer from further consideration.

Unlike other system RFPs, however, this request put the warning in bold (see bottom of page 8). Seems to be something Illinois TRS believes the private markets need made particularly clear…

Founder and Chief Executive Henrik Fisker tells Dow Jones VentureWire that he expects to close on the low-cost loan agreement in mid-March, now that his company has met the DOE’s equity commitment requirements. Last month, Fisker closed on $115.3 million in equity funding as it sets out to build a family vehicle that it expects will retail for $47,400 before a $7,500 federal tax credit.

The DOE offered to provide the loan in September on a conditional basis if Fisker meets certain milestones by Feb. 15. The government is expected to extend the loan, as it did with the $465 million loan that Tesla Motors Inc. secured last month.

Fisker ran into some delay getting third-party investors lined up for its funding round due to the economic slowdown, Henrik Fisker told VentureWire: “We had a delay in our business plan last year, so we’re now adjusting it. There was no technical issue; investors simply are coming out later with the money than planned.” On March 8, the CEO is scheduled to be the keynote speaker at the New Castle County Chamber of Commerce’s annual dinner in Delaware, where Fisker plans to build its assembly plant.

Fisker, which recently announced plans to close its Michigan R&D center, hopes to start delivering its Karma vehicle later this year, and said it has received $5,000 deposits from 1,600 people interested in purchasing the four-door car, which can travel 50 miles on its battery power before having to access the gasoline engine that will give it a range of another 250 miles.

One of the milestones Fisker committed to reach under the conditional loan is to sell 11,000 Karma cars at an average price of $87,900 by Sept. 30, 2011, but that number is likely to be different in the final loan contract, also owing to the delay in financing that pushed back the business plan, said CEO Fisker. He declined to disclose the new target, saying only that “it won’t be far away from [the 11,000].”

Read the story in VentureWire here.

But at one point, in the conversation he told me that he’s been tempted by startups a number of times but reminded himself of that old saying “the devil you know is better than the devil you don’t”.

I paused when I heard that comment. I believe that saying is counter productive.

To me, it says that the person is unwilling or unable to take chance or make a decision where the outcome is unknown. I told him that the outcome is rarely ever known.

I thought about that conversation last night while watching the Super Bowl. The Saints started the second half with an onside kick. I was blown away. What a gutsy call. I’m not sure how many teams recover an onside kick but that didn’t stop the Saints from giving it a try. They just went for it. And it paid off big time.

Gutsy calls knock on your door when you least expect it. Every startup I’ve been part of had uncertainly baked in. The first gutsy call I made was at 22. I quit my first job, took my life savings of <$3k, packed my life possessions in the back of my hatch back and drove from Boston to San Francisco in 4 days. I had no idea what life was going to bring.

Most people I’ve met in SF actually came from somewhere else. They left it all behind and didn’t think about the devil they know vs the devil they don’t. They just went for it. Maybe that is one reason why SF is a special place to me. It’s a gathering of folks that are taking personal risks.

Now, don’t get me wrong, people take risks everywhere but my direct & personal experience with SF transplants is an interesting datapoint (for me at least)

Most people that I’ve met who have remarkable life stories always looked back on their gutsy calls and were happy that they took that chance. Even if it didn’t work out in that specific instance they were better for leaving behind that safe cozy place.

Cuomo’s office declined to comment at the time, but today announced that the report was legit. Israel-focused Markstone will pay back $18 million in fees related to a $250 million investment from the New York State Common Retirement Fund into Markstone’s debut fund. It also has signed Cuomo’s “code of conduct,” which basically promises not to use placement agents for future fundraising efforts in the U.S.

Not sure how much that last part matters, considering that: (A) I really can’t imagine Markstone raising another fund, and (B) If Markstone does try to raise, it could focus on investors in Israel, where the code of conduct has no legal bearing. 

I’ve been critical of these settlements in the past, because they often look like get-out-of-jail cheap cards for private equity pros. Pay a little money and promise not to do bad in the future (without admitting to doing bad in the past).

This one is different, however, because Markstone co-founder and former chairman Elliott Broidy pled guilty in December to a felony count of rewarding official misconduct ($1m of gifts to pension officials in exchange for the $250m commitment). Still no word yet on what his sentence might be — as such rulings won’t occur until there is finality to the cases against former New York CIO David Loglisci and “placement agent” Hank Morris.

Also worth noting that Cuomo announced a $1 million settlement with Los Angeles-based Wetherly Capital, which had split fees for several fund placement jobs with Hank Morris. Cuomo also announced that Wetherly would exit the fund placement business, as we reported back in October.

There’s been talk of the GOP staff on the Energy and Natural Resources Committee, reporting to Sen. Murkowski of Alaska, possibly working on a revenue-neutral carbon tax proposal.

And Cantwell and Collins are proposing a “cap and dividend” plan, also to be revenue-neutral.

Gee, sounds familiar.

Frustratingly, I could probably have just cut-and-pasted my entire May 2009 column on this topic into a new post with no changes, and none of you would have realized it.  Because that’s how little things have moved forward over the past nine months.

Hopefully by now, however, it’s becoming more clear to politicians that any climate change legislation, if it’s to have a chance of passage at all, must be perceived as something other than just another tax-and-spend proposal. It has to be simple, and it should be tanglibly revenue-neutral. 

Leaders of the U.S. cleantech industry always claim they need a national price on carbon, first and foremost, so it’s nice to see some legislative efforts refocusing on just that.  Even if they’re not centerpiece efforts quite yet… 

In light of this, Venture Capital Dispatch sat down with Philip Eliot, a principal at Paladin Capital Group, a multi-stage private equity fund with a focus on national security, to talk about why these threats are proliferating and how the opportunities are changing for entrepreneurs and investors in the space.

At Paladin Capital, Eliot sits on the board of Unitrends Software Corp., a maker of data protection appliances, and helped manage its investment in CloudShield Technologies Inc., a maker of network traffic management equipment, that recently was sold to Science Applications International Corp.

Here is an edited version of our interview:

Q. What has changed that has made cyber security such a pressing issue?

Networks have become more open. All the tools that make our lives easier make cyber security a more challenging problem. One no longer needs to be physically proximal to data to have access to it, for which corporate road warriors are very grateful. The same architecture means that a criminal does not need to have physical access to data to compromise its integrity.

Q. Nearly every security company we write about these days claims to have some agency of the federal government, usually the Department of Defense, as a customer. Is the U.S. buying that much security or just trying out everything?

Both. There is a lot of testing going on. There are lots of pools of money in the government [like research grants] that are different from buying products in bulk. The dollars are there, but they’re are going to a smaller group than you would get the impression of. But, particularly coming out of the Department of Defense, there are a lot of companies that are selling product, not services, in bulk, like CloudShield.

Q. How is cyber security different than previous national security initiatives, like the development of radar?

It has a different dynamic than we saw in the past, where government was the primary source of R&D. A lot more development is coming from the private sector. Though the innovation is coming from outside the walls of the government, it still plays a large role in driving that through the size of its budget in being a large customer.

Q. Given its high priority, is it getting any easier to sell these products to the government?

When you have a champion on the inside, we have seen that things can go faster, but I’m not sure that the buying behavior is changing. You can still waste a lot of time and money knocking on the wrong doors.

Q. For companies that have not gotten any significant traction in this sector yet, is the window closing?

Cyber security is not going away. So much of our work and commerce takes place in networks. I don’t see any stop to the evolution of how we use those data networks and that’s paralleled by the need for security. The belief that we’ll find the cure or magic bullet to fix [these emerging issues] is naive at best.

Q. Within cyber security, what area do you think is the most promising for young businesses to pursue?

If we knew the answer to that, we’d be entrepreneurs, not investors.