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Monday, July 26, 2004 - Page updated at 12:00 A.M.
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Silicon Valley view
Experts are right: Silicon Valley is coming back

By Matt Marshall
Knight Ridder Newspapers

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SAN JOSE, Calif. — In case you didn't hear the first time — we'll clear our throats and say it again. Silicon Valley is back!

No hype intended. We're just forwarding on what the stock market and venture capitalists seem to be saying these days about technology and Silicon Valley's startup companies — the drivers of innovation, economic growth and job creation.

Jobs and VC money

First, there's the anecdotal stuff:

Eric Hahn, former senior vice president at Netscape Communications, has launched Proofpoint, an anti-spam company. He says the labor market is hotter than it has been for years. Venture capitalists are tripping over themselves to fund good companies, and offering sweeter deals: "It feels like Silicon Valley again," he declared at a conference held by Mohr Davidow Ventures. Even the shindig itself was retro: The company invited in media folks to chat with their portfolio CEOs, unheard of for several years.

AuctionDrop is an example of how Silicon Valley is benefiting from its ground-zero status of Internet innovation. The San Carlos, Calif., company makes it easier for people to sell items on eBay. They just drop off their item to any of the nation's 3,400 UPS stores.

UPS will forward it on to AuctionDrop, which will charge the customer a fee to do the dirty work online.

Here's how Silicon Valley profits: AuctionDrop's factory in Fremont receives every item shipped from UPS and unpacks and inspects it before sale.

The factory is designed to employ 500 people (today, it has fewer than 100). This auction traffic could go up to 3,500 pieces a day, from about 100 last month, according to Chief Executive Randy Adams. The company raised $7.2 million in November from Mobius and Draper Associates. It plans to raise another $20 million next month.

IPOs

Innovative companies as diverse as Nanosys (nanotech), Salesforce.com (software) and Ikanos (broadband) are going public, or at least filing to go public, with minimal, or even no, profits. Sound familiar?
 
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The latest to file for an initial public offering, was Fremont's Ikanos. If Ikanos pulls off an IPO, that suggests good things to come for a whole new array of applications based on increased broadband. We may finally have the ability to integrate HDTV, high-speed data and voice.

Ikanos hopes to expand broadband-access speeds to homes by introducing technology to local copper lines. Ikanos would boost DSL or cable-line capacity to 50 to 100 megabits per second, from a measly 1 to 5 megabits, according to Jupiter analyst Joe Laszlo.

Ikanos has gobbled up about $150 million in backing from venture companies such as Sequoia Capital and Walden International to see it through — and it plans to break even by the end of this year. If investors go for it, that's a vote of confidence in broadband.

Salesforce.com's IPO last week saw its shares jump 56 percent on the first day, more than any other IPO this year. Something's happening here.

Entrepreneurs are us

Joe Kraus, the founder of Excite, is the latest entrepreneur to return to action after a long hiatus. Now 32, he's back from a backpacking trip around the world to unwind after the frustrations of Excite@Home's implosion. But he said the addiction to "high-beta" life in a startup is too strong to withstand. He's launching another company with Excite co-founder Graham Spencer.

Innovation

Luis Mejia, of Stanford's Office of Technology Licensing, says students never stopped registering new inventions. They did go into hibernation until better days, though, and about half of them are still plugging away. And inventions are being disclosed to his office at record rates. "The rate has been going up and up."

Matt Marshall is a reporter at the San Jose Mercury News.

Copyright © 2004 The Seattle Times Company

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