Flame-thrower enthusiasts and giant dinosaur puppet-makers of the world, rejoice. The Awesome Foundation for Arts and Sciences wants to support your efforts. Starting in July, the new Cambridge, MA-based “microtrust” will be giving out one grant each month in the spirit of supporting creations that evoke “surprise and delight.” The application process is simple: explain your activity, project, or research idea in 500 words or less. Sufficiently awesome ideas will net their creator $1,000 and a month’s workspace in Beta House, the creative and technological work co-op in Cambridge’s Central Square.

But what lends an idea awesomeness? “It’s something ambitious. Outlandish. Unexpected,” says Tim Hwang, the founding member of the Awesome Foundation. The winning idea could be a computer program, an art project, a machine, or some unforeseen combination of the three. “We’re intentionally keeping it vague,” says Hwang. The foundation is reluctant to define “awesome” too rigidly, he says, for fear of restricting grantees’ creativity.

Ideas do not have to include a business model, though the Awesome Foundation is not averse to supporting a for-profit project. “We’re agnostic as to whether or not you’re going to make money off your idea,” Hwang says.

A researcher at Harvard’s Berkman Center for Internet and Society and the Web Ecology Project, Hwang came up with the idea for the Awesome Foundation while immersed in the grant application process. Applying for funding, he says, “is a really depressing thing. People get really excited about their idea, but run up against the bureaucratic nature of grants.” He hit upon the idea of creating a “microtrust” where a group of people would commit to donating a small amount of money—$100 a month. The money would be given free of any stipulations or strings. In early June, Hwang announced on his blog that he was looking for 10 people to contribute and form the first board of the Awesome Foundation.

Reed Sturtevant is one of Hwang’s “microtrustees.” When not funding awesomeness, he manages Microsoft’s Startup Labs in Cambridge. He sees his involvement with the Awesome Foundation as a way of giving back and encouraging entrepreneurial spirit. $1,000 might not seem like much, Sturtevant says, but “so many people just do amazing things for no reason. There are great creative people and ideas that just need a little spark to help them come forth.”

The application form for an Awesome Grant went online last Friday. By the end of the first day, the foundation had already received 30 prospects, Hwang says. Aside from a few joke applications (such as this one from “Mahmoud Ahmadinejad”: “I need funds to help fix an election in my country. Funds will go to paying people to vote for me, changing votes, lashing out at Western media, and getting my snazzy beard trimmed”), the ideas have run the gamut from technical to artistic. The first winner will be announced near the end of July. Hwang says the only thing the foundation asks of the winner is to show off their work at the end of their month at Beta House.

“We’re thinking of ordering a big checkbook,” Hwang said, “and some of those big scissors to do a ribbon-cutting.”

Awesome.

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Saving money on fuel by developing new types of hybrid engines is not just the pursuit of automakers any more. Under a government contract awarded earlier this week, San Diego’s General Atomics is developing a new hybrid electric drive system for a U.S. Navy warship.

“I think it has huge potential,” says Carl Fisher, who heads business development at General Atomics’ Electromagnetic Systems Division. Under the $32.7 million contract, the privately held San Diego defense contractor will develop and install a prototype hybrid electric drive system in an Arleigh Burke-class destroyer, the 509-foot guided-missile destroyer with a crew of 276.

A guided-missile destroyer

The destroyers are powered by four General Electric gas turbines capable of powering the ship at speeds in excess of 30 knots (about 35 mph). GA’s concept would basically convert the Navy’s modern man of war into a hybrid-electric Prius of the seas.

“Obviously, there are differences,” Fisher says, “but the analogy is consistent.” According to the GA executive, the Navy contract calls for integrating a prototype electric motor with the warship’s reduction gears, enabling the destroyer to use its electric motor for low-speed operations below 10 or 12 knots (about 14 mph). In a notice Wednesday, the Pentagon says the five-year contract awarded by the Naval Sea Systems Command is intended to demonstrate significant fuel savings by incorporating advanced electric machine technology. The work will be done in San Diego, Milwaukee, WI, and Hudson, MA.

The award is the latest in a series of major contracts the Navy has awarded to General Atomics’ electromagnetic division since 2004. Those contracts include:

—Development of the Navy’s first electromagnetic aircraft launcher, designed to replace the steam-powered catapults now used aboard U.S. aircraft carriers.

—Development of advanced arresting gear to snag landing aircraft, replacing hydraulic landing systems.

— Design of a Naval deck gun that uses electromagnetism instead of explosives to fire a projectile. Also known as a rail gun, the system is expected to lob a 31-pound shell almost 288 miles at Mach 7.5, farther and faster than any existing Naval artillery.

—Design of a 36.5-megawatt superconducting DC electric motor for ship propulsion. GA’s Fisher told me the hybrid motor contract announced this week is unrelated to GA’s development of a superconducting DC electric motor under a contract the Office of Naval Research awarded in 2005. The DC electric motor was conceived for the DD(X), a next-generation destroyer.

Steve Schreppler, program officer for electric ship propulsion systems at the Office of Naval Research, told me in 2005 that the move to electric power systems makes it easier for a ship to share power among its propulsion, service, and combat systems. If innovations in electric power and electromagnetic technologies enabled ships to use half as much power, that would be a big deal for the Navy, Schreppler said at the time.

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There’s not one but two venture-fund closings to report this week. More below on those, and the rest of the week’s deals news from New England’s life science and tech firms.

—Hopkinton, MA-based EMC (NYSE: EMC) won a protracted bidding war with rival NetApp over software maker Data Domain. After EMC increased its offer for Santa Clara, CA-based Data Domain (NASDAQ: DDUP) to $33.50 per share, Sunnyvale, CA-based NetApp (NASDAQ: NTAP) announced it would bow out of the competition for control of Data Domain, a maker of tools for data deduplication. Greg got a great exclusive (as far as we can tell) interview with Kai Li, Data Domain’s co-founder and chief scientist, about the company’s technology and strategy, the future of data storage, and the implications of the EMC deal.

—Excel Venture Management of Boston closed a $125 million fund, which it intends to invest in life sciences companies poised to affect a broad range of industries, including information technology, alternative energy, agriculture, textiles, and chemistry. Luke had an interesting chat with one of the firm’s managing directors, Juan Enriquez, about its plans and some of the startups already in its portfolio.

—Fellow life sciences venture firm 5AM Ventures surpassed the $150 million target for its third fund. 5AM, which has offices in Waltham, MA, and Menlo Park, CA, pulled in $159.2 million from 34 investors.

—Bedford, MA-based Rapid Micro Biosystems raised $18.6 million in a Series A round from Kleiner Perkins Caufield & Byers, TVM Capital, Quaker BioVentures, and VIMAC Milestone Medica Fund. The startup makes technology,

—E-mail archiving firm Sonian of Dedham, MA, raised $4.1 million out of a planned $6.6 million private stock offering, according to documents filed with the SEC.

—The numbers from June, provided by our new partner, ChubbyBrain, showed that healthcare startups were attracting the most investment in Massachusetts, accounting for 9 of the 17 deals done during the month. Not a single deal in June involved cleantech or energy.

—Quincy, MA-based Modiv Media, a provider of in-store digital media tools for grocery stores, raised $1.2 million out of a planned $2.52 million financing round.

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What if a company called a special shareholder meeting and nobody voted? Executives at San Diego’s TorreyPines Therapeutics pondered the question today after failing to muster enough votes for a proposal to liquidate and dissolve the company. In a statement, TorreyPines said 62 percent of the biotech’s stockholders failed to vote on the issue, which the board unanimously approved in May. The measure to dissolve the company requires a majority of outstanding voting shares for approval. In a bid to collect enough votes, TorreyPines adjourned its meeting until July 16th at the company’s corporate offices.

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Nexus Biosystems, a four-year-old biotech tools maker in Poway, CA, has raised $5 million in venture funding from Telegraph Hill Partners, a private equity firm based in San Francisco, according to a regulatory filing. Nexus CEO John Lillig, who declined to comment on the filing, told me the company specializes in making automated sample storage and retrieval systems capable of holding millions of compounds. In a statement, Nexus says the funding will be used to accelerate the commericalization of several new products, including a family of machines that store samples at minus-80 degrees Celsius.

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Next week, the U.S. Senate is expected to take up debate on health care reform. Regardless of what happens in Washington DC, the impact will be felt on virtually every business and individual in Washington State.

Without question, a simple solution to our health care crisis is elusive, and in the coming days and weeks many complicated and important issues will be debated, but from where I stand today, there is one key health care issue with no room for debate.

The issue is the development of a pathway for regulatory approval of biosimilars by the Food and Drug Administration (FDA). Biosimilars, as the name implies, are drugs that are similar to, but not the same as, innovator biologics. Biologics are molecular structures that can be hundreds of times more complex. That’s why copycat versions of biologics aren’t called “generics.” Biotechnology-based therapies that fight diseases such as cancer, diabetes, and Alzheimer’s are made from living cells—a process far more complex than the one used to manufacture chemical-based drugs such as aspirin.

The illustration below helps to put into perspective the differences between small molecule drugs and biologics:

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To give a sense of size, same-scale computer models of three drugs—aspirin (a small molecule), somatropin (human growth hormone), and Herceptin (an antibody)—are presented as an example of the relative complexity: The molecules are to scale and the objects are not, but the objects (bike, car, private jet) indicate relative size and complexity of these molecules. Used with Permission. Source: Genentech
http://www.gene.com/gene/about/views/followon-biologics.html

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Here in Washington State, we are fortunate to have great leadership on this issue from Representative Jay Inslee (D, WA-1). Rep. Inslee is one of the lead sponsors of the Pathway for Biosimilars Act (H.R. 1548), bipartisan legislation that protects patient safety and strikes the appropriate balance between increasing competition and maintaining our nation’s status as the world’s leader in science and innovation.

Rep. Inslee wants to make sure that biosimilar manufacturers are required to provide the FDA with clinical data on the safety and efficacy of their medicines. And his legislation preserves incentives for …Next Page »

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The directors of Foundry Group, a Boulder, CO-based venture firm, have signed on as supporters of the Alliance for Open Competition, a group lobbying to outlaw the use of non-compete clauses in employment agreements in Massachusetts and other states.

The alliance, founded last year by partners at Boston’s Spark Capital, argues that the non-compete clauses imposed by many Massachusetts employers stifle innovation by preventing entrepreneurs with good ideas from setting up new businesses that might be seen as competing with those of their former employers. Such agreements are unenforceable in California—a fact that may aggravate brain drain from New England to the West Coast, in the view of many people active in the local entrepreneurial scene.

Today Foundry managing directors Brad Feld, Seth Levine, Jason Mendelson, and Ryan McIntyre added their names to the list of venture capital partners supporting the alliance. Spark partner Bijan Sabet announced the additions in a Twitter post today.

But why would a Colorado firm care about non-compete clauses in Massachusetts? I pinged both Sabet and Feld today for answers.

In an e-mail, Feld explained: “Since we invest all over the US (including MA) we are motivated both by MA specific reasons as well as our strongly held beliefs that broad-based non-compete agreements are inhibitors of innovation.”

And as Sabet pointed out, Feld is a founding member of TechStars, a Colorado-born startup incubator program that recently opened a Boston branch. “So he cares about this state,” Sabet said.

Here’s a rundown of all VC partners who have now joined the Alliance for Competition:

Bijan Sabet, General Partner, Spark Capital
Brad Feld, Managing Director, Foundry Group
Dennis Miller, General Partner, Spark Capital
Gwill York, General Partner, Lighthouse Capital Partners
Jeff Fagnan, General Partner, Atlas Venture
Michael Feinstein, Managing Director, Sempre Management
Michael Greeley, General Partner, Flybridge Capital Partners
Mike Tyrell, General Partner, Venrock
Jason Mendelson Managing Director, Foundry Group
Paul Conway, General Partner, Spark Capital
Paul Maeder, General Partner, Highland Capital
Ryan McIntyre, Managing Director, Foundry Group
Santo Politi, General Partner, Spark Capital
Seth Levine, Managing Director, Foundry Group
Todd Dagres, General Partner, Spark Capital

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Every new technology brings new options and opportunities for people to learn, explore, and of course, sell to each other. Internet video has proven no exception. Companies today can whip up professional ads, demos, and explanatory videos and expose them to the whole world for just a few hundred dollars, compared to the thousands and millions it costs for a television ad. Seattle-based Delve Networks is one of many businesses that help companies publish videos online, certain that video is the key to Internet marketing. To get ahead of the competition, Delve today announced a new self-service option to its website, allowing companies to upload, manage, and publish their videos in just a few minutes.

Businesses that want videos on their site—and there are more of them all the time—can not only upload the videos, but analyze them for their impact and use them for advertising. Another key aspect of the program is that users are able to search in videos for specific items, facilitating sales. Convenience being so important for businesses, Delve hopes to draw customers to the program with a low monthly fee (about $300).

Ideas like self-service are important in a field where even Yahoo-owned video host Maven Networks is shutting down its video publishing service. Cisco recently reported that it expects 91 percent of Internet consumer traffic will be through video by 2013. Delve is even trying to pick up Maven’s former customers, offering lower fees for Maven customers who switch to Delve.

To further promote its new service, Delve is offering a 30-day free trial of its program, hoping to hook customers who like what they find. Given the popularity of immediate online communication like Twitter, same-day video publishing will probably appeal to businesses—especially those looking for more than 180 characters to advertise their product.

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Seattle-based Internet retailer Amazon today announced the launch of a new website focused on selling mobile phones and phone plans. AmazonWireless is limited to AT&T and Verizon plans but will expand as beta testing goes on. Currently, over 120 types of phone are available for sale. The main purpose of the site, according to the announcement, is to ease the process of buying or upgrading a phone or plan by getting rid of the paperwork and rebate mailing that an in-store purchase engenders.

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Seattle-based Evri, an Internet startup backed by Paul Allen’s Vulcan Capital, announced a new chief executive today, Will Hunsinger, the former CEO of San Francisco-based Adeze and entrepreneur-in-residence at Seattle venture firm Maveron. Hunsinger succeeds Neil Roseman, who is leaving Evri to become an entrepreneur-in-residence at Vulcan Capital. Evri focuses on information discovery and browsing, and has partnerships with the Washington Post and the Times of London.

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We had some good news, mixed news, and odd news about San Diego’s life sciences companies over the past week. Read on for our full spectrum of coverage.

—San Diego’s Intellikine said in a recent regulatory filing that it had raised $16 million in venture capital, and plans to raise an additional $22.5 million. But that was only part of the story. The startup biotech, which is developing a new class of cancer drugs, said in a statement yesterday it actually has closed on $28.5 million in the current venture round, and up to $22.5 million can be accessed, depending on Intellikine’s ability to meet certain performance goals. The company also identified the four new investors who participated in the round: Novartis Bioventures, which is lead investor in the current round; Biogen Idec (NASDAQ: BIIB); FinTech Global Capital; and U.S. Venture Partners. Three existing investors also put money in: Sofinnova Ventures, Abingworth Management, and CMEA Ventures.

—When an FDA advisory panel recently recommended new restrictions on the pain reliever acetaminophen, Luke checked in with San Diego’s Cadence Pharmaceuticals to see how that would affect its development of Acetavance—the first intravenous form of acetaminophen. Cadence CEO Ted Schroeder said it’s not a concern, however, because clinical trials showed Acetavance the intravenous treatment provided effective pain relief at lower doses than the levels that raised safety concerns for the FDA panel. Cadence, which is awaiting FDA approval for the pain reliever, plans to market it to hospitals as a safer alternative to narcotics for patients who can’t take oral medications.

—San Diego’s Somaxon Pharmaceuticals (Nasdaq:SOMX) says the FDA has accepted the company’s revised new drug application for its insomnia drug doxepin (Silenor). The biotech also raised about $6 million in a private stock placement, which should be enough to carry it through the next 12 months.

—San Diego’s Vical (NASDAQ:VICL), which is developing DNA-based vaccines, said it’s encouraged by early results from a mid-stage trial of a vaccine it’s developing for cytomegalovirus. But Vical said complete results from the study won’t be done until early 2010.

—San Diego’s Lpath (OTC:LPTN), which is developing antibody drugs for cancer, told Denise the dismissal of its outside auditor was an unfortunate case of bad timing. A spokesman for Lpath explained that the company decided to change accounting firms some time ago, but Lpath didn’t have a replacement auditor lined up before proxy ballots were printed. So Lpath asked shareholders at its June 24 annual meeting to vote to approve the retention of LevitZacks—then dismissed the firm five days later.

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SEC documents published online today indicate that Quincy, MA-based Modiv Media, which helps grocery stores deliver in-store digital media, has collected $1.2 million out of a planned $2.52 million financing round. The documents list Ignition Partners partner Steven Hooper and Seapoint Ventures managing partner Thomas Huseby as board members. Modiv completed an $8 million Series A round in late 2007, with participation by Ignition, Seapoint, and Oak Investment Partners.

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San Diego’s Arena Pharmaceuticals (NASDAQ: ARNA) was trading just under $4 a share today, after the company priced its secondary public offering of 12.5 million shares yesterday at $4.17. Arena shares closed Tuesday at $4.67. Arena said last month that it had arranged $100 million in debt financing with Deerfield Management, a significant shareholder, that’s needed to complete final trials of its obesity drug, lorcaserin, and to carry the company through its new drug application review with the FDA. The company says its secondary stock offering was pursuant to a shelf registration filed in November. Arena is expected to raise approximately $52.1 million before expenses, with Piper Jaffray & Co. acting as sole underwriter.

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Drug development startup Intellikine is disclosing the names of the new investors in its latest round of venture financing, which could total up to $51 million, according to a press release the La Jolla-based firm issued yesterday. The new investors behind the firm’s second-round financing are Novartis Bioventures, Cambridge, MA-based biotech powerhouse Biogen Idec (NASDAQ:BIIB), FinTech Global Capital, and U.S. Venture Partners.

The names of these first-time investors in Intellikine—which is developing drugs to home in on a hot target in cancer treatment—weren’t disclosed when Luke first covered this financing on July 2 and reported that previous backers Sofinnova Ventures, Abingworth Management, and CMEA Ventures had all chipped in for part of the financing. Intellikine now says that Novartis Bioventures led the round, of which $28.5 million has been closed and up to $22.5 million more can be accessed depending on the company’s ability to reach certain performance goals. The potential total of $51 million is a change from the $38.5 million the firm said was the upper limit of this financing in an SEC filing.

Markus Goebel, managing director of Novartis Venture Funds, has joined the board of directors at Intellikine as a result of Novartis’ investment in the startup. Novartis Venture Funds is the venture arm of Swiss drug giant Novartis.

“Intellikine has rapidly assembled one of the best pipelines against a very important class of drug targets,” Goebel said in a statement. “I am very much looking forward to working with the management team and board to build the company and, in particular, to establish clinical proof of concept for the company’s lead programs.”

Intellikine—launched in 2007 with a $12.5 million first round of financing—is developing compounds that block the PI3K pathway, which studies have shown plays a key role in the survival and migration of cancer cells. It plans to develop its drugs to treat cancer as well as inflammatory and autoimmune diseases. Within 12 months the company expects to begin the first human study of its lead compound, INK128, which has shown promise in treating cancer in animal studies.

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Tyngsboro, MA-based flywheel energy storage company Beacon Power (NASDAQ: BCON) announced last week that the U.S. Department of Energy has extended a loan guarantee amounting to $43 million. The loan will provide more than half of the financing for a planned 20-megawatt commercial flywheel energy storage facility to be built in Stephentown, NY. But the loan comes at a high cost: the Business Insider reports this week that Beacon Power spent three years and $1 million on the application process.

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Now I know why venture capitalists walk the halls at the University of Washington—you never know who you might run into. My timing was impeccable yesterday as I sat down with Kai Li, the co-founder and chief scientist of Data Domain (NASDAQ: DDUP), the Santa Clara, CA-based data storage company that just got bought by EMC (NYSE: EMC) for $2.1 billion in cash.

Li, who is a computer science professor at Princeton University (he has been visiting the UW for the past year and has some strong Seattle connections), made time for me despite his busy schedule. The deal with EMC has been in the works since June 1, when the Hopkinton, MA-based data storage and management giant launched its bid to acquire Data Domain despite a pending acquisition attempt by rival NetApp (NASDAQ: NTAP) initiated in May. Many twists and turns ensued, culminating in yesterday’s announcement by NetApp that it had taken itself out of the running, clearing the way for EMC’s takeover, at a bid of $33.50 per share.

Data Domain’s story is a compelling one. Li co-founded the company in 2001, together with Brian Biles (currently vice president of product management) and Ben Zhu (former chief research officer), with the idea of developing advanced “deduplication” software to get rid of redundant data before it gets stored, thereby saving companies storage space, time, and money. Li served as chief technology officer and CEO in the early days of the company, but since 2002 has been a consulting chief scientist and director. Over the next few years, Data Domain gained traction in the data backup and disaster recovery market and went public in June 2007, raising more than $110 million in an IPO.

In a wide-ranging interview, Li (left) talked about Data Domain’s technical approach, its market strategy, a little bit about the EMC deal, and the broader future of data storage. Here is an edited account:

Xconomy: So how does the EMC acquisition affect you?

Kai Li: I don’t know yet. EMC has been the leader in storage systems in general. They’re bigger than other players in the storage market, comparing with NetApp, IBM, HP, Dell, and Sun (now part of Oracle). EMC is the premier storage vendor for data centers. We haven’t been communicating with EMC because of the definitive agreement with NetApp, so I haven’t talked to EMC yet.

X: How does the deal affect Data Domain’s operations?

KL: EMC has written a letter to Data Domain employees. They said they’ll keep Data Domain …Next Page »

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Xconomy has learned that MicroGreen Polymers, an Arlington, WA-based developer of technology to recycle plastics into cheaper, environmentally friendly coffee cups among other things, has raised $1.6 million for expansion from WRF Capital and local angel investors (Northwest Energy Angels, Alliance of Angels, and Atlas Accelerator), out of an ongoing round the company expects will net $3 to $4 million later this month.

The money will be used to build up MicroGreen’s commercial manufacturing capacity, and boost its payroll from 9 people to as many as 30 over the next year, says CEO Tom Malone. The company is also scouting new locations, likely to be in Everett, WA, he says.

MicroGreen got started in 2002, when it spun out of the University of Washington. The basic idea from founders Greg Branch and Krishna Nadella, a pair of graduate students, was to see if they could develop a technique to squeeze high-pressure liquid carbon dioxide into plastics, to heat them up and expand them while in a solid state. This process creates billions of tiny microbubbles that allow manufacturers to maintain most of the properties of regular plastic, while using a lot less of the regular plastic that is made from oil. The MicroGreen technique also creates a handy insulating layer of air inside the plastic, which can protect your hand from getting burned while holding that hot morning coffee. But plastics are everywhere in the modern world, and MicroGreen Polymers sees plenty of opportunities to stick its recycled product into markets that are worth billions.

“We can use less plastic to do the same work,” Malone says. “It’s a less-is-more story.”

The technology, which MicroGreen calls “Ad-air” does just that—it adds air bubbles into recycled PET plastics (like the stuff from water and soda bottles), which makes the subsequent product lighter, uses less material, and makes it cheaper, Malone says. It retains many, but not all of the same properties as the original plastic, so it can’t be used for everything, he says.

The initial applications of the MicroGreen technology have been for a reflector plate that a Japanese manufacturer used to make liquid crystal display TVs appear brighter, and for a contract with Northrup Grumman to help make some electronics equipment lighter, Malone says. These aren’t huge clients, generating revenue of about $1 million last year, and almost $2 million this year, Malone says.

Bigger opportunities lie ahead in disposable coffee cups, food packaging such as …Next Page »

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Led by the Bay State’s strong healthcare sector, Massachusetts startups attracted just over $145 million in investment in June. That’s the tally from our new partner, ChubbyBrain, a New York-based information services company developing tools for investors, startups, and aspiring entrepreneurs.

Health care companies—spanning drug development, medical devices, and consumer health and wellness—were the focus of 9 of the 17 deals done during the month. But the investment activity ran the gamut from telecommunications and semiconductors to social media and online marketing.

Leading the pack in terms of dollars raised was Cambridge-based biopharmaceutical company Aileron Therapeutics, which pulled in $40 million in a Series D round led by GlaxoSmithKline and Excel Medical Ventures. But that still left more than $100 million for the remaining 16 deals spotted by ChubbyBrain, 14 of which were, like Aileron, venture investments, and two of which involved debt financing. Notably, with all the recent talk (including at the Xconomy Summit on Innovation, Technology, and Entrepreneurship) about early stage deals going by the wayside, 6 of the 15 venture financings were Series A rounds.

The complete June deals list is below. But here are a few other observations from the ChubbyBrain data:

—The most active area venture firm was Polaris Venture Partners of Waltham, MA, which took part in a trio of deals. Flagship Ventures, the Massachusetts Technology Development Corporation, and Baird Venture Partners were in two deals apiece.

—Of the 9 healthcare deals, four involved medical device companies.

—Not a single deal involved cleantech or energy. That is consistent with a nationwide falloff in cleantech investment in the first quarter noted by the National Venture Capital Association.

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Seattle biotech is quieting down these days, so it’s a good time for your local life sciences correspondent to step away on vacation. See you back here on July 20.

—EndoGastric Solutions, the medical device firm based in Redmond, WA, and Redwood City, CA, raised $7.5 million from investors. The company makes devices to combat heartburn and obesity. It was originally incubated at Scout Medical Technologies in Kirkland, WA, and has previously raised $79 million from investors including MPM Capital and Advanced Technology Ventures.

—The writing has been on the wall for months at Seattle-based Targeted Genetics (NASDAQ: TGEN), and this week the company may have pulled an important last-ditch maneuver to avoid bankruptcy, or at least hold on a while longer. By paying a $500,000 termination fee, Targeted Genetics escaped a $12 million lease obligation on a manufacturing facility in Bothell, WA, that Targeted Genetics never occupied. This could clean up the balance sheet enough, the company hopes, to entice a partner or other investor to provide capital to keep the doors open beyond August.

—Amgen (NASDAQ: AMGN), the world’s largest biotechnology company, said its lead experimental drug, denosumab, reached all its goals in a clinical trial of more than 2,000 women with breast cancer. The Amgen drug, which is also vying for FDA approval as an osteoporosis treatment, has been studied for more than a decade as a cancer drug at Amgen’s Seattle research center, as I described in a feature in October. So this result has been a long time coming. Detailed results will be presented later at a medical meeting, Amgen said.

—I profiled Kineta, a Seattle-based biotech company formed by a team that worked together at Seattle-based Illumigen before that company was sold to Lexington, MA-based Cubist Pharmaceuticals (NASDAQ: CBST) in October 2007. Team members don’t want to create the next fully integrated biotech company, like Amgen, but instead want to zero in on one delicate spot in the drug development process they know well—early-stage clinical trials.

—Seattle-based Theraclone Sciences received some good news this week when the International AIDS Vaccine Initiative agreed to continue funding a program to develop antibodies that might have broad potential for HIV vaccines and drugs. Terms weren’t disclosed.

—Qliance Medical Management, a Seattle-based company that won’t accept insurance for primary care medical services and instead relies on patients paying a monthly membership fee for such services, raised $4 million from Second Avenue Partners, New Atlantic Ventures, and Clear Fir Partners. Qliance is aiming high, attempting to help form closer connections between patients and doctors by eliminating the insurance middleman, at a time when power players in Washington, DC, are talking about potentially sweeping reforms in how healthcare gets delivered in America.

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In the past few months I have had the opportunity to interact with a number of state and federal officials as the financial crisis has unfolded. And for the most part my faith in the system has been renewed.

In my capacity as chair of the New England Venture Capital Association, I have met a number of times with Governor Deval Patrick of Massachusetts, and in fact I chair his recently formed Entrepreneurship Committee for the Mass IT Collaborative. I have also worked closely with his Secretary of Economic Development, Greg Bialecki, who is working very hard on a number of important initiatives to drive local job growth and company formation. As a board member of the National Venture Capital Association I have also met with Representative Barney Frank to review possible federal regulation of the venture capital industry as part of the pending overarching regulation of the financial services industry.

And what I found was a group of legislators very concerned and engaged in finding constructive solutions—and I appreciate better the big sticks they wield. As the crisis began to unfold last fall the meetings went along the lines of “What is going on? How bad is this going to be?” Now that we seemed to hit a point of some stability, the meetings now are much more focused on finding solutions and launching programs to bolster the innovation economy. For instance, Secretary Bialecki was instrumental in securing initial funding for MassChallenge, an exciting initiative to bring entrepreneurs and investors together.

Admittedly my initial interest in being involved was to see how the VC industry might play a role in seeing as much of the federal stimulus moneys make their way to our portfolio companies as possible. I had suggested to Governor Patrick that a group of VCs advise in the allocation of stimulus dollars on a local level. Notwithstanding the enormity of the stimulus spending, it turns out to be reasonably difficult to pull levers which would quickly get funds to our companies.

My other interest in being involved was much more parochial. I was worried that the government would paint with too broad of a regulatory brush as it tried to “fix” the hedge fund industry and perhaps inadvertently slap around the VC industry as well. The idea that the VC industry somehow caused systemic risk to me was ridiculous—we do not use leverage, do not have public securities, ask our investors to lock up for 10 years, do not use derivatives, etc)—yet there was emerging rhetoric about the risk VCs brought to the financial markets.

On this score I was very pleased with what I heard from key government leaders, particularly Representative Frank. There is great understanding of the important role that the venture industry plays—most officials clearly understand that it is the new companies which create the jobs and growth—and importantly that the VC industry is fundamentally different from the hedge fund world and does not inherently pose great risk.

As I said to Governor Patrick in my office a few months ago, since we started Flybridge Capital Partners nearly 8 years ago we have helped to start almost 45 companies which at the end of 2008 employed 1,231 people.

So maybe I am wrong—we do have a very highly leveraged model.

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Genzyme dominates the market for treating Gaucher’s disease, each year selling more than $1.2 billion worth of its drug imiglucerase (Cerezyme) to patients with the rare genetic disease, who need to take the treatment throughout their lives. But competitors are flocking in to grab some of the market now that the Cambridge, MA-based biotech is running low on supplies. Switzerland-based Actelion, the maker of the only other FDA-approved treatment for Gaucher’s, is one of the companies hoping to fill the void.

Genzyme (NASDAQ: GENZ) has had to answer a lot of questions from doctors, patients, and investors since June 16, when it said it discovered a viral contamination at its Allston, MA-based manufacturing plant, where it makes imiglucerase and other therapies for rare genetic disorders. The contamination meant the Genzyme plant would need to be shut down and disinfected, causing a supply interruption which the company now estimates will last six to eight weeks, beginning in August.

This situation has created plenty of consternation for patients with Gaucher’s (go-SHAYZ). They need to stay on their medication to prevent the buildup of a fatty substance in their spleen, liver, lungs, and bones—which can keep those organs from functioning properly and lead to extreme fatigue, and even death. The Genzyme drug, approved by the FDA back in 1994, is an enzyme replacement therapy that is generally “very beneficial” for patients with the most common form of Gaucher’s, according to the National Institutes of Health.

Actelion’s drug miglustat (Zavesca) came along in 2003, when Genzyme had already secured a dominant position in the market, and is still a small player in the treatment of Gaucher’s. Only about 90 patients in the U.S., and 300 total worldwide, currently take the Actelion drug, generating about $36 million in revenue last year, says Kirk Taylor, the senior vice president of Actelion’s U.S. medical department. So Actelion’s task will be to persuade doctors and patients to give miglustat a try during the shortage …Next Page »

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In news that’s not exactly unexpected, a mid-year survey shows that fundraising among U.S. venture capital firms is near low ebb, with the total raised so far at the lowest point since 2003, when 34 VC funds raised $2.2 billion in the first half of the year.

The survey released today by Dow Jones Private Equity Analyst shows shows 51 venture firms raised $5.1 billion nationwide during the first six months of 2009—down almost two thirds from last year, when 115 VC firms raised $13.6 billion.

The survey found similar results for fundraising by all types of private equity funds, not just venture capital, with 173 PE funds raising $54.9 billion during the first six months of 2009. That was 64 percent less than the $152.7 billion raised by 261 funds during the first half of 2008.

In a statement, Jennifer Rossa, the managing editor of Dow Jones Private Equity Analyst, said, “Right now, most venture firms are more concerned about conserving cash and helping portfolio companies survive than raising a new fund.”

The largest venture capital fund raised so far belongs to New Enterprise Associates of Baltimore, MD, which got $907 million for its eighth venture fund. The firm has said it intends to raise $2.5 billion for the fund, known as New Enterprise Associates XIII.

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Sunnyvale, CA-based NetApp (NASDAQ: NTAP) said today it would not try to top EMC’s $33.50 per share offer for Data Domain (NASDAQ: DDUP), clearing the way for the Hopkinton, MA-based storage and information management giant to acquire the much-sought-after provider of data deduplication software.

NetApp kicked off the competition for Data Domain on May 20 with a $25-per-share offer that Data Domain’s board quickly accepted. But then EMC came along, first offering $30 per share—a price NetApp matched—then $33.50.

In a statement today, NetApp said it couldn’t afford to keep upping its bid. “NetApp applies a disciplined approach to acquisitions, one focused intently on creating long-term value for our stockholders,” said NetApp chairman and CEO Dan Warmenhoven. “We therefore cannot justify engaging in an increasingly expensive and dilutive bidding war that would diminish the deal’s strategic and financial benefits.”

As a result of the termination of their merger agreement, Data Domain has paid its original suitor a $57 million break-up fee, NetApp said.

The $33.50-per-share bid from EMC (NYSE: EMC) came on July 6 and is worth about $2.1 billion overall. “This is a compelling acquisition from both a strategic and financial standpoint,” EMC CEO Joseph Tucci said in a statement. “We look forward to bringing Data Domain together with EMC to form a powerful force in next-generation disk-based backup and archive. I have tremendous respect for Data Domain’s people, technology and business, and anticipate great things ahead for our respective companies, our customers and partners.”

In a July 6 letter to the Data Domain board, Tucci said EMC had already received approval from federal regulators to proceed with an acquisition of Data Domain, and that the transaction could be completed in as little as two weeks. EMC said today it expects to complete the acquisition “before the end of July.”

Deduplication software like that made by Data Domain reduces storage needs by eliminating redundant data before it’s sent to archival servers. EMC already offers deduplication as part of its Avamar family of backup software. But it’s a different kind of deduplication from that offered by Data Domain.

Avamar handles “source” deduplication, meaning that data is filtered out before it’s transmitted to a backup system, which saves bandwidth. But Data Domain offers “target” deduplication, meaning redundancies are identified at the backup location, ultimately saving more space.

EMC wants to offer its customers both forms of deduplication. In repeated missives to Data Domain’s board, EMC argued that target deduplication technology would find a broader market under EMC than under NetApp’s ownership. Now it will have the opportunity to test that theory.

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Amazon’s e-book reader, the Kindle, dropped $60 in price today from $359 to $299, only five months after the February debut of the second generation reader.

The price change comes as something of a surprise, after repeated statements from Amazon CEO Jeff Bezos to the effect that the company could not sell the Kindle for less than $359, given the expense of components such as its electronic-ink screen, made by Cambridge, MA-based E Ink. ”If we could make it cheaper we would. We can’t make it cheaper,” Bezos said in an interview with Reuters in February.

Technology seems to have improved since then. In an e-mail message today, Amazon public relations manager Cinthia Portugal said “We’ve been able to increase the volume of Kindles we’re manufacturing and decrease the cost of doing so. Across our business at Amazon.com, whenever we are able to create cost efficiencies like this, we pass the savings along to our customers.”

Amazon is notorious for being unwilling to share sales information about the Kindle devices or the content they display. But in terms of manufacturing, iSuppli estimated after “tearing down” the Kindle 2 that the cost of the device’s parts totals only $185.

Although still comprising less than one percent of the overall book market, the digital reading market is growing fast, and it seems likely that many consumers will take the Kindle 2 price drop as their signal to try e-books. Amazon’s other e-reader meanwhile, a larger version of the Kindle that launched in June called the Kindle DX, is still retailing for $489 and is sold out for the next three to five weeks.

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Maynard, MA-based Monster Worldwide (NYSE: MWW), which maintains the world’s largest job listings site, said today that it will eliminate 160 positions globally as part of a restructuring. Fifty of the layoffs will occur at the Maynard headquarters. (We’ve updated our Boston Tech Layoff Tracker accordingly.) At the same time, Monster announced that it will open a new “Technology Center of Excellence & Innovation” in Kendall Square in Cambridge, MA, where it will hire at least 80 new technical employees to develop next-generation products and search technologies.

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Medical device firm EndoGastric Solutions, based in Redmond, WA, and Redwood City, CA, has raised $7.5 million in funding, according to a regulatory filing. The company makes devices to combat heartburn and obesity, and previously raised $79 million in venture funding from the likes of MPM Capital, Advanced Technology Ventures, and DeNovo Ventures. EndoGastric was originally incubated at Scout Medical Technologies in Kirkland, WA.

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Nuclear waste dumps require careful handling. To avoid incidences of nuclear material leaking into the surrounding soil and water, the Department of Energy must monitor the 80 sites in the U.S. regularly and do its best to adjust conditions if warranted. Issaquah, WA-based consulting firm Predicus has used mathematical modeling software developed by fellow Issaquah company GoldSim Technology Group to create a software program to help the DOE do just that.

According to a news release today, the DOE will use the Prioritization Risk Integration Simulation Model (PRISM) created by Predicus and GoldSim to evaluate the Hanford, WA, nuclear waste facility. If the evaluation goes well, the program may be used at the other American nuclear waste sites as well. Financial details of the DOE contract were not disclosed.

PRISM will run data provided by Predicus and the DOE on the facilities’ capabilities, the environment, and other factors so Predicus can recommend appropriate management plans. PRISM takes into account not only environmental issues, but budgetary and legal considerations in its calculations.  It will then simulate different possibilities so the DOE can figure out what, if anything, needs to be done to improve the nuclear waste sites and prioritize those projects based on things like immediate need and available money.

GoldSim’s software was originally released in 1999, although the company was founded in its current form in 2004. The software has been adapted for risk management and planning for businesses, academic institutions, and government agencies around the world.

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Vical (NASDAQ:VICL) says early results from a mid-stage trial of its cytomegalovirus vaccine look promising. The San Diego-based company says that at four months, 30 percent of treated patients had infections compared to 50 percent in the untreated group. Viral load measurements and other data all favor the vaccinated group, according to Vical, which did not provide a statistical analysis of the results. Although complete results from the study are due in early 2010, Vical says it is encouraged enough to plan its late-stage trial of the vaccine and talk with potential development partners. But investors seem unimpressed. Vical shares dipped 23 cents, or almost 9 percent, to $2.44 in afternoon trading.

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The fight between Microsoft and Google for the future of computing just got more intense. Last night, Google officially announced a new project, a Web browser-based operating system called Google Chrome OS, which will initially target netbooks. Google said it would make the code available on an open-source basis later this year, and plans to put the operating system on netbooks for consumers in the second half of 2010.

The announcement looks to hit Microsoft where it really counts—on its home turf of PC operating systems. It is a direct threat to the Redmond, WA, company’s biggest product, Microsoft Windows. But there is nothing too surprising about this news. With the launch of the Google Chrome browser nine months ago, and applications like Gmail, Google Calendar, and Google Docs finally emerging from beta this week, the move just underscores the idea that Google is getting serious about the Web as the operating system of the future.

Make no mistake about it, Microsoft is ready for this. Last week, the company posted some detailed thoughts about its own browser-based operating system project, called Gazelle. OK, maybe it’s too soon to call Gazelle an operating system—it’s more like a browser that behaves a little like an operating system, doing things like allocating computing resources and protecting Web applications from each other. There’s even a rumor that Microsoft will make a big announcement on Monday related to Gazelle or other Web-based software.

I think all of this is posturing at this point. Google’s operating system won’t be available on actual hardware for another year. Windows 7 will come out in October, and we’ll see how it does on netbooks, as well as PCs. Some computing experts and critics are already complaining about privacy issues with Web-based operating systems. (Do you really want Google to know your every move on your PC as well as the Web?) So while some are calling Google Chrome OS a “nuclear bomb” dropped on Microsoft, I see it more as an official passing of the torch, and the beginning of a regime change in public perception—from one evil empire to another.

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Cozi, a free online family organizing and planning application, is partnering with Nestlé to launch their service on Nestlé’s website according to an announcement made today.  Financial details were not released.  The Seattle-based Cozi provides family-oriented programs to plan schedules, make lists and create photo albums online.  Nestlé plans on putting Cozi’s programs, rebranded with both company names, on its site on July 15 as part of their back-to-school campaign this year.  According to the release, Cozi currently has over 1.4 million users.

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Microsoft’s New England Research & Development Center at One Memorial Drive here in Cambridge, MA—NERD, as it is so affectionately called inside and outside the company—has quickly become one of the central gathering spots for the Boston tech community.

In late March, the company opened a big conference area on its second floor, and almost from day one has been making it available for free to a variety of outside groups—from Tech Tuesdays to the Environmental Defense Fund, which just last week held an unconference about green business practices at NERD.

Well, as part of that welcoming spirit, I guess you would call it, the company has quietly posted its logo for the facility. The logo shows the Boston skyline (roughly as seen from NERD) in shaded blue, and the stylized Longfellow Bridge connecting it with Cambridge in orange. “We kind of flipped the switch this morning,” says Sara Spalding, senior director of NERD. “We really felt that we wanted to have a design that reflected our presence her in the greater Boston area, and Cambridge in particular.”

Out to get to the bottom of the story in true hard-hitting journalistic fashion, I asked her if there was a deep symbolism behind the logo, such as a metaphorical bridge linking Microsoft with the larger Boston innovation scene.

Nope. “There’s no clever reverse image or play it backwards on your stereo,” she says. “There’s no deeper meaning.”

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Scott Weinbrandt spent 25 years working in computer technology, including 10 years as an executive at Dell, the direct-sales computer giant, as well as time as a senior vice president at Gateway, the onetime San Diego computer maker that is now part of Acer. During that time, the computer industry moved from centralized mainframes to distributed personal computers.

Now Weinbrandt says he’s seeing the same trend emerging in the renewable energy sector as the president and chairman of Helix Wind, a San Diego startup that specializes in vertical-axis wind turbines. “Big wind is getting a big pushback,” Weinbrandt says.

While many companies are still pursuing big centralized wind farm projects, such as the one near Palm Springs, CA, there’s also a movement to install smaller wind turbines in backyards and on rooftops.

If he’s right about the trend, Weinbrandt has positioned Helix Wind (OTC: HLXW) to catch the prevailing breeze by targeting urban residential and commercial customers. “If you look at what we’re doing, our goal is to be the No. 1 small wind solutions provider,” Weinbrandt says.

The helical-shaped turbines developed by Helix Wind founders Ian Gardner and Ken Morgan are visually stunning—they look so much like spinning sculptures that Weinbrandt says some customers are buying them for the product’s aesthetic value. So-called Savonius turbines, such as Helix Wind’s iconic design, are usually considered less efficient at generating electricity than propeller-driven turbines with a horizontal axis. But Weinbrandt says a key benefit of the helical platform is its ability to operate at high torque in lower wind speeds—and to continue operating at high wind speeds.

“What we’ve done is take it to another level,” Weinbrandt says, noting Helix has 43 IP filings in the U.S. and elsewhere, with one patent pending at two trademarks received. “This technology has been refined and one of the key components is the ability to start up in light winds and still sustain high winds without shutting down. Most of our competitors have to shut down at 40 miles per hour.” The cleantech company says it competes with a variety of other vertical-axis turbine makers in the U.S., including Oregon Wind of Portland, OR, and Mariah Power of Reno, NV.

While Helix counts more than 250 different types of small …Next Page »

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Dedham, MA-based Sonian, which provides cloud-based e-mail archiving services, has raised $4.1 million out of a planned $6.6 million private stock offering, according to regulatory documents filed yesterday. Prism Ventureworks partner William Kohler is named as a Sonian board member.

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On Monday we learned that Rob Day, a former principal at @Ventures in Wilmington, MA, and one of the dynamic young leaders of the energy investing scene in New England, has taken on a new assignment. He’s become a partner at Black Coral Capital, a Boston-based private equity fund formed in 2008 to build a cleantech investment portfolio for an unnamed high-net-worth family.

I’ve known Day ever since mid-2007, when I wrote about the nearly simultaneous decisions that he and Advanced Technology Ventures principal Andrew Friendly made to leave energy-related jobs in California and take jobs in New England cleantech investing. Both Day and Friendly have helped bring new vitality to the Boston-area energy innovation community, setting up an East Coast branch of the California-based Renewable Energy Business Network and participating in numerous local events. Most recently, Day was part of a panel on bringing energy innovations to market at Xconomy’s XSITE summit on June 24.

I caught up with Day by phone Tuesday morning, and asked him to tell me about Black Coral, which had been more or less in stealth mode until Day circulated a note about his job switch. Here’s the transcript:

Xconomy: What’s Black Coral all about?

Rob Day: It’s a new family office, with a broad mandate to invest in private equity in clean energy and related technologies.

X: What family is behind it?

RD: We have to maintain privacy about that.

X: But they’ve decided to put some of their money specifically into clean technology—why?

RD: They’ve got good strategic assets in related areas of energy, and they’re looking to put some money into the clean energy side of it. So we know we have some good assets we can bring to bear in our investments, but we also have a pretty broad mandate to develop an investment strategy with new things that make sense. We are going to be investing directly, and also indirectly, as limited partners in venture funds. We are looking across all sorts of private equity classes—capital projects, buyouts, early stage companies, growth stage, later stage. We’re really starting from a blank slate, which we think makes sense in this interesting time, economically.

X: When you talk about bringing strategic assets to bear, does that mean you’re going to be leaning away from new energy-generation technologies toward things that fit with the existing energy infrastructure?

RD: As much as anything else that reflects that the folks around the table are pretty pragmatic. We are investing to find good investments, we’re not making investments just in the latest cool technology.

X: Do you think too much venture capital in the cleantech industry has gone into blue-sky ideas?

RD: To be clear, at the places I’ve worked in the past, there has always been a shared pragmatic approach around the table. That’s why I’ve always invested in things like energy efficiency myself, in addition to other things. But if you look at where the money has gone in the cleantech venture structure, a lot of it has yet to come to market in terms of commercialized products. That, by itself, should tell you that there has been a lot of emphasis on funding breakthroughs, what some people have called the “black swan” technologies, where as the folks around the table at Black Coral are going to be really focused on …Next Page »

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Boston-based online computer backup provider Carbonite announced an agreement yesterday with Sun Microsystems that could broaden the startup’s user base. Computer users who download Sun’s Java runtime environment for the first time, or who upgrade to the newest version of Java, will be offered a 30-day free trial of the Carbonite service. “This program will increase awareness of the importance of data backup among the millions of loyal Java users,” Carbonite president and COO Keith Cooper said in a statement.

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Rapid Micro Biosystems, a Bedford, MA-based developer of technology that quickly spots microbes that can cause disaster in the biotech drugmaking process, has nailed down a whopping $18.6 million in a Series A round of venture financing.

The company, led by CEO Steve Delity, secured the cash from Kleiner Perkins Caufield & Byers, TVM Capital, Quaker BioVentures, and VIMAC Milestone Medica Fund. Rapid Micro’s technology was commercialized last year, and the new capital will be used to expand in the U.S., Europe, and, ultimately, other parts of the world, Rapid Micro said.

Microbial invaders can spell big trouble for a biotech company if they sneak their way into the vats where protein drugs are nurtured, inside living cells. Cambridge, MA-based Genzyme (NASDAQ: GENZ) is feeling the pain from a viral contamination, which has caused a shutdown of its Allston, MA, manufacturing plant and 6-8 week supply shortages of two of its top-selling protein drugs. Rapid Micro’s lead product, called the Growth Direct System, is supposed to greatly speed up the surveillance process by using digital imaging technology to replace detection by microbiology cultures judged by the human eye. This is a big potential market, as drugmakers and other companies perform 350 million tests a year to detect microbial contamination in their manufacturing processes, Rapid Micro has said.

“Large pharma, biologics, and personal care product manufacturers have been searching for a faster, more effective solution for quality control which meets their strict regulatory compliance requirements,” Delity said in a statement. “Our company will change the way microbial testing is performed by replacing old art with 21st century technology.”

Thomas Monath, a partner with Kleiner Perkins; Jens Eckstein, a general partner with TVM Capital; and Richard Kollender, a partner at Quaker BioVentures; will join the company’s board as part of the deal. Rapid Micro attracted the new round of investment because of its “combination of a unique, high-throughput technology addressing a large market demand, and an outstanding management team,” Monath said in a statement.

Eckstein said via e-mail that the company’s “technology is the only available solution that perfectly matches FDA regulations for microbial testing enabling non-destructive counting of microbial colonies. Or in other words manufacturing people do not have to introduce a new method into their processes but rather get a more sensitive and reliable technology.”

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[Editor's Note: this piece is adapted from a speech Chris Rathe gave at a memorial service last week for Stephen Quinn, a biotech entrepreneur who died suddenly on June 28.]

We are here today grieving the untimely passing of Stephen Quinn, but are also here to rejoice for the person that he was. Four years ago I first met Stephen furthering his quest to understand new technology and help support its development and commercialization. Today I project that the Seattle area, and over time, the world at large will long remember Stephen for his visionary leadership in moving proven science from the laboratories of Dr. Buddy Ratner and other key researchers in our community and recently across this country, presenting this work as commercial opportunities, and helping create five biotech companies in just the past few years.

I was also blessed to know Stephen as a good friend and to see his love and devotion as a husband to Katherine and as a father to his three daughters, Anastasia, Ava, and Mya, with a special love for his teenage daughter Anastasia, as she adjusted to her new sisters arriving into their growing family with Katherine.

We all have a lot to be thankful for in knowing Stephen. He encouraged us all to be better people. Here is some added perspective from a mutual friend, Scot Cocanour; “Stephen brought out the best in me, I suspect in all of us. The quizzical look, the slight tilt of his head, a few sharply pointed questions—they leveraged me to a whole new plane of insightfulness. His earnest, restlessness helped me to develop ideas and concepts that were resident in me but not yet liberated. I’m thankful for my time with him.”

Paraphrasing George Bernard Shaw: From my first hand experience I am of the opinion that Stephen’s life belonged to the extended community, and as long as he lived, it was his privilege to do for it whatever he could. Life was no brief candle for him. Life was a torch that he had gotten a hold of and wanted to make it burn as brightly as possible before handing it on to future generations.

It appears Stephen lived at least at double the speed of mere mortals. He enjoyed double the experiences, the ideas, the friendships, and play. As many of you came to know, his mind moved at double speed as well. Though Stephen may have been alive for only 46 years, he was a person that created added decades of experience into his colorful, and thoughtful life.

In closing I’d like to ask that we share a common vision of extending love and bettering human health on this planet, in honor of Stephen, in honor of those living and deceased, and especially in honor of those still to come. What we do for ourselves alone dies with us; what we do for others and the world remains and is immortal. A Chinese proverb summaries the growth opportunity for most of us, “If we exercise great caution nothing will happen”. I will continue to tell Stephen’s children, and his many extended friends and family, that Stephen not only stood for something wonderful, but he also acted on it.

Stephen will be truly missed by those that knew him.

With Love, Chris Rathe

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Seattle-based Kineta doesn’t want to grow up to be the next Amgen. It has seen plenty of biotech companies go up in flames when they try to do everything from drug discovery to development, and manufacturing to marketing. Instead, the company sees opportunity in carving out one piece of that product development continuum, doing it well, and hopefully making some money.

Sound odd? It’s all part of an unusual business plan at Kineta, a company formed last year by CEO Charles Magness and chief scientist Shawn Iadonato, who worked together at Seattle-based Illumigen before that company was sold to Lexington, MA-based Cubist Pharmaceuticals. I sat down with them last week at their new offices in Seattle’s South Lake Union neighborhood to hear about the company strategy and its initial case-study—drug candidates it acquired for autoimmune diseases like multiple sclerosis and Type 1 diabetes.

The company was founded on the basic idea that there is a great supply of drug candidates in the biotech and pharmaceutical industries in the preclinical (animal testing) phase, but little demand for those products until someone generates evidence they work in human trials, Iadonato says. On the other end of the spectrum, there’s great demand from patients for new therapies, but a slim supply of really promising drugs in the late stages of development to meet the demand. The Kineta group, through work at Illumigen and other companies, showed they were skilled at taking relatively untested drugs through the late preclinical and early-stage clinical trials—steps that often trip up larger companies, and take a lot longer than they think.

So the Kineta concept is to cast about for promising drug candidates in animal tests, acquire licenses for pretty modest terms, run them through early-stage clinical trials on a strict budget of time and money, and then form a partnership with a bigger drugmaker who has the money and manpower to run bigger trials needed to win FDA approval for a new drug. If all goes as planned, Kineta will collect the usual upfront payments on these deals, milestones from success in later development, and royalties on product sales if they ever become marketed products. And they’ll repeat the cycle many times over. Essentially, they plan to do a couple of essential drug development steps well, and let other people try to be the next Amgen or Genentech.

“A lot of biotechs are built on ill-defined timelines, and ill-defined amounts of investment, …Next Page »

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Perhaps New England’s life sciences companies were busy building arks this past week, because the news flow was a heck of a lot lighter than the rainfall. There are still a few interesting developments to report, though.

—Cambridge, MA-based Biogen Idec (NASDAQ:BIIB) agreed to pay $110 million up front, plus up to $400 million in additional fees, for the rights to develop and commercialize the multiple sclerosis drug Fampridine-SR overseas. The drug’s developer, Hawthorne, NY-based Acorda Therapeutics (NASDAQ:ACOR), will retain U.S. marketing rights.

—Ryan caught up with Xconomist Alexis Borisy, who last week left his post as the CEO of CombinatoRx (NASDAQ:CRXX), the Cambridge, MA-based firm he launched in 2000 to develop novel treatments based on combinations of existing drugs. Borisy spoke candidly about the “miserable” experience of having to lay off about 100 workers after his company’s lead drug failed in a mid-stage clinical trial last October, and about his hopes for the firm’s future, which includes a planned merger with Vancouver’s Neuromed Pharmaceuticals.

—Luke profiled Boston-based Immuneering, the brainchild of 27-year-old CEO Ben Zeskind and 30-year biotech veteran Bob Carpenter who, among other accomplishments, sold one of his companies to Genzyme (NASDAQ: GENZ) for $1 billion. The startup wants to use its proprietary mathematical modeling tools, based on research from the MIT lab of Doug Lauffenburger, to help figure out from blood and biopsy samples which cancer patients will respond to which drugs. This could spare patients the side effects of drugs that won’t work for them and could spare insurance companies the expense of those drugs.

—Hologic (NASDAQ: HOLX), a women’s health-focused firm in Bedford, MA, won FDA approval for a device called Adiana designed to provide a less-invasive alternative to tubal ligation. The permanent contraceptive device was approved for the European market in January.

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Five days after its June 24 annual meeting, San Diego’s Lpath (OTC:LPTN) dismissed the accounting firm LevitZacks for undisclosed reasons, according to a recent SEC filing. The biotech had recommended retaining the accounting firm to shareholders.

In its SEC filing, Lpath noted that LevitZacks had expressed uncertainty about Lpath’s ability to continue as a going concern in audit reports for 2007 and 2008. On the other hand, Lpath also says that throughout that period—and until LevitZacks’ June 29th dismissal—there were no disagreements with its independent accounting firm “on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedures.”

Geoffrey Plank of Liolios Group, a spokesman for Lpath, says the dismissal of LevitZacks wasn’t as abrupt as it appeared. Lpath decided to change accounting firms some time go, Plank says, but the company didn’t have a replacement auditor in place before its proxies were printed. So he says the company asked shareholders to approve LevitZacks.

The accounting firm had been Lpath’s auditor for nearly four years, and received $120,900 from Lpath in 2008.

Lpath said in its regulatory filing that it appointed the accounting firm of Moss Adams as its new auditor. Lpath had been using Moss Adams to audit the company’s use of federal grant funding. The company’s spokesman says Moss Adams is a larger firm with more experience in biotech and the selection of Moss Adams allows Lpath to consolidate its accounting functions “under one roof.” Plank also says Lpath was pleased with LevitZacks and remains on good terms with the firm. The head of LevitZacks could not be reached for comment at the firm’s San Diego office today. 

Lpath, which works on antibody drugs for cancer and other conditions, lost $11.5 million in 2008. The company had $6.7 million in cash at the end of the first quarter but could receive $39 million from partner Merck Serono later this year if an early stage test of a cancer drug is successful. Lpath shares closed today at $1.24, down 11 cents.

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Amgen (NASDAQ: AMGN), the world’s largest biotechnology company, said today that its lead experimental drug, denosumab, reached all its goals in a clinical trial of more than 2,000 women with breast cancer. Women with breast cancer often have tumors spread to their bones, and the drug, “dmab,” was able to delay the time it took for that damaging effect to occur, when compared with Novartis’ zoledronic acid (Zometa). The Amgen drug, which is also vying for FDA approval as an osteoporosis treatment, has been studied for more than a decade as a cancer drug at Amgen’s Seattle research center, as I described in a feature in October.

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Last week, we reported that Prometheus Energy, the Redmond, WA-based liquid natural gas producer, closed a $10 million investment from Shell Technology Ventures in a deal that is still resonating in the local alternative energy community. Prometheus, led by co-founder and chief executive Kirt Montague, has gone through many ups and downs since its formation in 2003. Now, through a strategic partnership with Big Oil, the company is looking to go global with its technology for taking methane gas from landfills and other waste sources and converting it into relatively clean-burning liquid natural gas fuel.

I heard from a couple of Northwest cleantech venture capitalists who commented on the significance of the deal. To me, their reactions help underscore the importance of finding the right partner at the right stage in a company’s life, especially in the tricky world of alternative fuels.

From Gregg Semler, co-founder and managing director at Portland, OR-based Pivotal Investments:

“I think it is an important deal from many perspectives. It not only validates the business opportunity for waste to energy deals but it demonstrates how important startups can be to the innovation cycle for global companies like Shell. As you know, a lot of cleantech is disrupting very large, global markets where the major competition is already well established. It can be challenging for startups to break in to an existing market. This demonstrates that companies like Shell are strongly motivated to do deals with innovative companies like Prometheus. As part of the aligning of interest, often times they will provide the necessary capital to get to the next stage of validation. Often times this kind of relationship is compelling to venture investors and helps if you are trying to raise additional venture capital. There are many other waste to energy companies in the Northwest as well as other startups where corporate partnering makes a whole lot of sense. It is not an easy time to be raising capital. This deal should motivate other early stage clean tech companies to source strong strategic corporate partners that can make a difference to achieve their goals.”

From Rick LeFaivre, managing director at Kirkland, WA-based OVP Venture Partners:

“I applaud Kirt for hanging in there and landing a strategic investor. Alternative fuel ventures quickly become ‘project build out’ deals that require lots of capital to build plants. They typically aren’t early-stage venture deals, which is why we tend to steer away (which is not to say they won’t be good investments for someone—just not us). Bringing in a strategic partner who can invest the capital required to scale the business is exactly the right way to go. This differentiation is important: I continue to hear discussion about ‘the lack of early-stage venture capital in the [Pacific Northwest] for cleantech ventures.’ The reality is that firms like OVP are actively looking for early-stage ventures in this space, but that typically means a leveragable technology platform that leads to profitability on a modest amount of investment with significant upside potential, vs. large project finance opportunities that require hundreds of millions of dollars to scale the business. It’s not that one model is ‘better’ than the other, but rather they are different kinds of investments, requiring different kinds of investors.”

“Bottom line: great to see another Seattle-based cleantech deal get funded, and it sounds like the funding came from the right kind of investor.”

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Earth Class Mail, a Seattle-based company that delivers physical mail digitally announced today that it is working with Kansas City, MO-based Perfect Output to create a combined document and mail-processing service. Financial details were not released. Earth Class Mail, which creates digital forms of paper letters and mail for businesses, will provide key technology for Perfect Output’s document-management service.  According to the release, Earth Class Mail’s system saves companies 75 percent on document storage and retrieval costs.

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5AM Ventures, a life sciences-focused early stage venture capital firm, has surpassed its $150 million target for its third fund, reports PE Hub. An SEC filing that indicates 5AM, which has offices in Waltham, MA, and Menlo Park, CA, has raised $159.2 million from 34 investors. Companies in the firm’s portfolio include Pulmatrix, a Lexington, MA-based startup developing an aerosol treatment for flu other pathogens, and Cambridge, MA-based Semprus BioSciences, which is making polymers that bond to the surface of medical devices to prevent clots and infections and to promote healing.

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San Diego’s Somaxon Pharmaceuticals (Nasdaq: SOMX) says it has submitted a revised new drug application for its insomnia drug doxepin (Silenor), and the biotech raised about $6 million in a private stock placement to see it through the NDA process.

As I noted in February, the U.S. Food and Drug Administration turned down Somaxon’s initial application, asking the drug developer to address concerns about prolonging the heart’s QT interval—a key measure of the heart’s electrical rhythm. Somaxon said it intended to regroup and try again, and it met with FDA officials in April to gain a better understanding of the regulators’ concerns.

The company also spent some time on a financial makeover. Somaxon said in May it had erased $15 million in debt, although the company also had depleted its available cash from $14.3 million at the end of December to $3.8 million at the end of March. The company also reduced its operating costs. Somaxon reported a loss of $4.5 million for the first quarter that ended March 31, down from a loss of $7.1 million during the same quarter in 2008. As a development stage pharma, the company had no revenues.

The company also said in May it’s continuing to look for a Big Pharma partner to help further development of doxepin, and it signaled its intent to raise cash for another go at FDA approval. Several of the company’s existing investors are participating in the financing, including MPM Capital, Montreux Equity Partners, Scale Venture Partners, Prospect Venture Partners and Domain Associates, as well as Tavistock Life Sciences and other new investors.

In a statement today, Somaxon CEO Richard W. Pasco says, “We expect that the cash raised in this financing, together with our existing resources, will allow us to operate our business through the FDA review cycle of the NDA resubmission and extend our cash runway through the second quarter of 2010.”

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Bedford, MA-based Hologic (NASDAQ: HOLX) announced that the FDA has approved its permanent contraception device, called Adiana. Offering a less-invasive alternative to tubal ligation—a surgical procedure that is one of the most common forms of contraception worldwide—the device can be inserted via catheter through the vagina in a 15-minute procedure. Hologic gained European approval for the device this past January.

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And then there were five. Here at Xconomy, we have made our selections for the five finalists who will compete at our inaugural Battle of the Tech Bands in Seattle, to be held on the evening of Thursday, July 30 at the WTIA Summer Celebration at the Pyramid Alehouse. We are looking forward to putting on a spectacular show. (Registration info is here.)

It’s been a long road. We put out the call for bands more than two months ago. We got a couple dozen competitive entrants (thanks to all the bands who applied). We listened to demos, sorted through band bios and websites, consulted our esteemed judges, and listened some more. After a few days of intensive discussions, we arrived at our top picks.

Five finalists, and five words: They are going to rock.

Their mix of musical styles, personalities, and companies represented (each band has at least one member from a Northwest technology firm) is pretty awesome. Most of all, each of them has a legitimate chance to win. In music, as in business, it all comes down to execution, right?

Two awards will be given at the event on July 30. One will be for Audience Favorite, based on voting by all of you, the attendees. The other will be for Most Innovative Band, which will be decided by a select panel of judges, together with Xconomy and WTIA staff.

So here they are—the five bands—along with the tech companies their members represent, my personal impressions of them, and why each has a real shot at winning. Please check out their stuff, come out and support the local tech-music scene, and cast your vote on July 30. We’ll see you there.

Drumroll, please…

Afraid of Figs
(MorphoTrak, Robert Half Technology)
Light, infectious pop rock reminiscent of Barenaked Ladies and Cake.
Why they could win: With a song called “I Ate a Vegan,” anything is possible.

Between These Lines
(Hewlett-Packard)
Contemporary alt-rock quintet with a polished, radio-ready sound.
Why they could win: With expertly crafted songs and strong stage presence, they might be hard to top.

Indigo Soul
(Microsoft, Adobe)
The melodic intersection of classic rock, 80s pop, soulful lyrics, and rocking rhythms.
Why they could win: Their music might be just perfect for a warm, mid-summer evening celebration.

Juda’s Wake
(Microsoft)
Killer metal chops. Need we say more?
Why they could win: This band would have a chance to win any contest they entered—and I mean any.

Lions Ambition
(Boeing, Microsoft)
Energetic hip-hop, rock, and soul with monstrous hooks and catchy lyrics.
Why they could win: The whole city might be dancing after one song.

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Ralph Mayer got involved in Southern California’s Tech Coast Angels almost as soon as he moved to San Diego a decade ago, after working on computer-assisted design technologies at Chelmsford, MA-based Adra Systems and its sister company, MatrixOne.

Now Mayer is chairman of the board of governors at the Tech Coast Angels, which bills itself as the largest angel investment network in the U.S. Since the angels group was founded in 1997, the TCA recently announced its members have invested a total of $100 million in about 125 SoCal startups—inducing more than $1 billion in follow-on venture investments.

When I met Mayer for coffee last month, he told me VCs initially didn’t like angel-funded companies, partly because they didn’t know who to deal with among a startup company’s angel investors. That’s because a typical TCA investment is about $500,000, with 40 TCA members each making individual investments of $25,000 in the deal. Nowadays, the TCA uses standard venture investment term sheets, and one member assumes the role of lead investor with each company.

Ralph Mayer

Soon after I met Mayer, I talked with Mission Ventures founder Robert Kibble about the declining number of San Diego’s hometown venture capital firms. My post on that prompted San Diego Venture Group board member Carrie Stone to take exception—in an Xconomist Forum commentary that says, essentially, that if San Diego continues to build innovative companies, then the venture capital will come from somewhere.

Still, I was struck by the increasing importance of angel investors in general, and the Tech Coast Angels in particular—especially at a time when San Diego-based venture firms’ outlook is clouded. So I posed a few questions to Mayer and Mike Elconin, who is president of the Tech Coast Angels San Diego Network, about the shifting venture landscape in San Diego. (I knew Elconin from previous stories I’ve posted about investments by the Tech Coast Angels in San Diego.)

Xconomy: What are you seeing in San Diego’s venture community? Do you think it’s important for San Diego to have hometown VCs?

Mike Elconin

Mike Elconin: I have no data to back it up, but the VC “industry” in San Diego seems to be a shadow of what it was five years ago when measured solely by VCs doing new deals. In my opinion, this is a result of two trends: One is that VC activity nationally, and especially in California, is migrating to the San Francisco Bay area, something we detect not only in San Diego, but throughout the Tech Coast Angels’ footprint, which includes Orange County and Los Angeles. The other trend is that VC activity was trending down even before the current recession. I think both trends are painfully obvious and continuing.

Ralph Mayer: When looking at VC investment, one has to look at the type of investment. Some VCs just do seed deals, some do medium-size series A, some do large series A, some just do follow-on rounds, etc. VCs that are investing $5 million, $10 million, or even more per investment are very willing to travel to the source of those deals. However VCs (and angels) who are investing hundreds of thousands are much less likely to travel. There is an old truism that investors invest …Next Page »

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Cancer drugs are notorious for offering slim odds of helping patients live longer, while guaranteeing they’ll suffer some unhappy side effects. Lots of scientists are searching for clues in the genome for how to select people most likely to benefit from a drug, while sparing everyone else. Boston-based Immuneering thinks there’s a better place to look—the immune system.

Immuneering popped on my radar at last week’s XSITE event at Boston University, where I met CEO and founder Ben Zeskind. He’s 27, with a list of accomplishments that puts him in boy wonder territory. He’s got a bachelor’s in electrical engineering and computer science from MIT, a Ph.D in bioengineering from the Whitehead Institute, and an MBA from Harvard Business School. Zeskind didn’t tell me about his background, but got my attention when he said he’s recruited Bob Carpenter to be his chairman and mentor. Carpenter is 64, a 30-year biotech entrepreneur who once sold a company to Genzyme (NASDAQ: GENZ) for $1 billion, and since then has spent 15 years on the Cambridge, MA-based biotech giant’s board of directors.

This mentor-and-protege team has its sights on making a fundamental change in cancer treatment. Immuneering wants to take blood and tumor biopsy samples, look at whether the patient has immune cells with the right characteristics to produce a powerful, long-lasting immune response against tumors, and run those readouts through a proprietary mathematical model to predict the odds that a patient will respond to a drug. This fundamental understanding should also offer suggestions for how to boost the odds of success, explain why some drugs work for individuals and not others, and do it for virtually every type of cancer with a few tweaks to the model, Carpenter says.

Since the global market for cancer drugs was worth $66 billion in 2008, and is expected to grow to $84 billion by 2012, governments and health insurers are going to continue putting a lot of pressure on drugmakers to justify all that cost, largely through tools that can predict …Next Page »

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The activity in the Northwest picked up a little bit around the holiday weekend. In the past week, we’ve seen some interesting deals in alternative energy, healthcare, and software.

—Seattle-based Qliance Medical Management raised $4 million in venture capital led by Second Avenue Partners, with participation from New Atlantic Ventures and Clear Fir Partners, as Luke reported. Qliance provides basic healthcare to patients without involving health insurance companies, with the idea of paying doctors to spend more time with fewer patients. The company was founded in 2006 and has raised a total of $7.5 million. Luke first profiled the firm, which is led by CEO Norm Wu, back in December.

—Xconomy reported that Prometheus Energy, a Redmond, WA-based producer of liquid natural gas, raised $10 million from Shell Technology Ventures (managed by Netherlands-based Kenda Capital), with $10 million more coming down the road if Prometheus meets certain milestones. It’s a big deal for Prometheus, which has developed a novel method of producing alternative fuel from waste gases at landfills, coal mines, and other facilities. It’s also a big deal for Seattle cleantech and for the alternative fuels industry, which needs support from big oil companies.

—R.W. Beck, a Seattle-based engineering and business consulting firm, has been acquired by SAIC (NYSE: SAI), the San Diego government contractor, as Eric reported. Financial terms weren’t given. SAIC performs research and services for U.S. intelligence, defense, and security agencies. R.W. Beck was founded in 1942 and focuses on the energy and infrastructure sectors.

—Seattle stealth startup Ground Truth raised $2.6 million in equity funding, according to an SEC filing. The investors include venture capitalists Tom Huseby and Erik Benson of Voyager Capital in Seattle, and Beau Laskey of Steamboat Ventures in Burbank, CA. Ground Truth is led by executives Sterling Wilson and Michael Libes.

—Burnaby, BC-based Ballard Power Systems (NASDAQ: BLDP) has teamed up with Bend, OR-based IdaTech to sell 310 hydrogen-fueled generators to ACME Tele Power, a wireless infrastructure company in India, as Eric reported. Terms of the sale weren’t disclosed. The generators will help ACME produce backup power to maintain wireless networks during outages.

—The Financial Times reported that Microsoft (NASDAQ: MSFT) is in the process of selling Razorfish, its Seattle-based online advertising subsidiary. The report, which has not been confirmed by Microsoft, claims Morgan Stanley has been appointed to find a buyer, and that Publicis, a French marketing firm, is a possible bidder. Microsoft acquired Razorfish in 2007 as part of its $6.4 billion purchase of aQuantive in 2007.

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