Peter Principle

MIT LCS Professor Anant Agarwal started Tilera, located in Massachusetts and just down the street in Silicon Valley, to develop “programmable ASICs and associated compilers”. They seem to still be in stealth mode, since their web site is content-free. But Private Equity Week says they’ve raised a tidy sum in Series B funding: Multiprocessor startup reportedly raises $20 million.

Tilera (Santa Clara, Calif.) was founded by Anant Agarwal, professor of engineering and computer science at the Massachusetts Institute of Technology. Agarwal serves as chief technology officer at Tilera. The company is run by Bessemer operating partner Devesh Garg, who serves as chief executive officer.

The New York Times has another article on why it’s so hard to duplicate Silicon Valley:

When It Comes to Innovation, Geography Is Destiny

“Face-to-face is still very important for exchange of ideas, and nowhere is this exchange more valuable than in Silicon Valley,” says Paul M. Romer, a professor in the Graduate School of Business at Stanford who is known for studying the economics of ideas.

In short, “geography matters,” Professor Romer said. Give birth to an information-technology idea in Silicon Valley and the chances of success seem vastly higher than when it is done in another ZIP code.

About one-quarter of all venture investment in the United States goes to Silicon Valley enterprises.

A recent NY Times article interviews millionaires in Silicon Valley complaining about how they “almost made it”. These poor saps now  listlessly manage their investments, sit on company boards, and window-shop for sports cars. All the while glaring jealously at their buddies who became … billionaires.

In Web World, Rich Now Envy the Superrich

Envy may be a sin in some books, but it is a powerful driving force in Silicon Valley, where technical achievements are admired but financial payoffs are the ultimate form of recognition. And now that the YouTube purchase has amplified talk of a second dot-com boom, many high-tech entrepreneurs — successful and not so successful — are examining their lives as measured against upstarts who have made it bigger.
Some find inspiration in others’ success, while some spend tremendous amounts of psychic energy worrying about how rich their friends are.

In the midst of all that hand-wringing, I find my old school buddy PZ, now at Harvard!

Envy can even affect relationships among siblings. When he was growing up in Winchester, Mass., Peter Pezaris told friends and family that he planned to become a millionaire by the age of 30 and a billionaire by 40.

“I remember thinking, ‘Yeah, sure, right,’ ” said Mr. Pezaris’s older brother, John, a computational neuroscientist at Harvard.

True to his word, in 1999, Peter Pezaris sold his two-year-old business, Commissioner.com, to CBS SportsLine for $46 million, three days after his 30th birthday. (The proceeds were shared among five partners; his brother was not among them.)

Peter Pezaris, 37, who is now based in Boca Raton, Fla., said he still believed that he had “plenty of time” to become a billionaire by age 40 with his new start-up, Multiply.com, a social networking site.

This time his brother is paying closer attention. John Pezaris had helped informally with the first business; now he programs for Multiply in his spare time and has a formal stake.

“I wanted to codify something for his second one,” said John Pezaris, who is 43. “So we came to an arrangement.”

According to an article in the NYT, Silicon Valley still receives much more venture funding than other parts of the country.

In the first six months of this year, Silicon Valley still pulled in 32 percent; the region with the second-largest total, New England, was far behind, at 10 percent.

The reasons are well known – a ready supply of technical professionals, good infrastructure, a risk taking attitude, and of course, close proximity to venture capitalists. How close is a bit surprising. Most of the VC firms are clustered in just a few blocks on Sand Hill Road in Menlo Park. And the VCs seem to still insist on the “20-minute rule” for new startups.

If a start-up company seeking venture capital is not within a 20-minute drive of the venture firm’s offices, it will not be funded.

Why? Forget phone conferences and telecommuting. Most VCs still insist on face-to-face meetings. And in the early stages of a startup, you need a lot of meetings with different VC firms to get that crucial funding.

Venture capital firms are still investing in chip designs in Silicon Valley, but at a far lower rate than during the boom years.

The numbers do show it’s getting harder to fund a chip company. Chip start-ups account for 10 percent of the money poured into all start-ups, compared with 22 percent in 2001. And the average amount of money per deal is down from $11.9 million to $9.4 million. Venture capitalists say that the investment payoffs are lower than they used to be since few companies go public at $1 billion valuations anymore. And cheaper start-ups, such as social networking companies, are more fashionable.

Chip start-up fundings hit a peak in Silicon Valley in the third quarter of 2000 with $1.1 billion of investments. The fundings bottomed out in the fourth quarter of 2002 at $231 million. They have steadily risen to $554 million in the second quarter of 2006.

The New York Times just printed a map of 25 Silicon Valley companies accused of manipulating stock options for executives.

Of the more than 80 businesses that have been caught up in federal investigations or have announced their own internal reviews, technology companies make up the overwhelming majority.

The practice of backdating options dates to the early 1990’s but took on momentum during the frenzied days of the Internet era, when the competition for available talent was fierce. Numerous Silicon Valley insiders described the practice as routine.

As scores of Silicon Valley firms went public in the late 1990’s, there was enormous pressure on many accounting firms and law firms to keep their newly minted clients happy.

“These guys were dancing on leather tabletops in their leather pants,” Mr. Melbinger said. “The rules didn’t apply to them. They were the new Masters of the Universe. If they called one firm and they wouldn’t do it, you’d have firms lining up to take their business.”

Eww! That’s one mental image I could have lived without.