Venture capital funding still slow in Southern California

For many SoCal start-ups, the bank vault is still closed. Credit Anonymous Account via Flickr.

The numbers for start-up investments are out, and in Southern California, they're not so good.

It's a familiar refrain: venture capital funding is tight;start-ups need to sit and wait until venture capitalists have some more funding money. The bad news is that those in Southern California might have to wait a little bit longer.

Nationally, investors put $5.27 billion into start-ups during the second quarter of this year, up 32% from the first quarter. But Southern California attracted only $433 million in venture investment in the second quarter, down 12% from the first quarter. That's according to a Dow Jones VentureSource report scheduled to be released Saturday.

In Los Angeles, venture capitalists invested $111 million, down 34% from the first quarter. That’s down 74% from the same period last year.

“Los Angeles had another challenging quarter,” said Mike Schoenfeld, venture capital advisory group leader at Ernst & Young.

Nationally, investment in information technology crept up 8.5% from the first quarter. But the amount invested during the second quarter, $1.9 billion, is a 41% decline from last year's $3.2 billion. And for the first time since Dow Jones started keeping track in 1992, investment in the healthcare sector outpaced investment in information technology. Venture capitalists put $2.23 billion into healthcare deals in the second quarter.

Things aren't likely to turn around until venture capitalists see more IPOs and mergers and are able to exit their companies, said Samit Varma, a partner with Santa Monica's Anthem Venture Partners.

"They’re waiting until 2010 until the storm is over and the cycle becomes realistic again," he said.

Some of the local start-ups able to raise money this quarter include Generate, a Santa Monica media company that got $2 million, CoreObjects Software of Los Angeles, which raised $2 million, and HauteLook, a Los Angeles Web company that received $10 million.

-- Alana Semuels

AT&T relents on iPhone 3G S upgrade pricing

iPhone users don't want to pay more for the 3G S. Credit: ArabCrunch via Flickr

It was a conflict for some Mac lovers when Apple unveiled its iPhone 3G S this month: drool over the newest gadget, or riot over the fact that they couldn't have it for cheap? Apple and AT&T, it seems, didn't provide a way for existing iPhone 3G users to upgrade to the newest model at a reasonable price. Instead, they'd have to pay $399 while new users pay $199.

Irate iPhone owners blogged, Tweeted and trash-talked, all in an effort to get Apple to stop "ripping us off." More than 4,000 signed an online petition.

The strategy appears to have worked. AT&T said today that customers who are eligible for an upgrade any time between now and the end of September, and who spend at least $99 a month in service fees per phone line, can get the 3G S for the same price as new buyers starting tomorrow online, or Friday at its physical stores.

Previously, only those who had owned their iPhones for 12 to 18 months would have qualified for the "best upgrade price" -- $199 for the 16-gigabyte version or $299 for the 32-gigabyte phone.

If you don't fall into any of those categories, you're out of luck for now. AT&T offers you some not-so-exciting options. You can pay $599 for a 16-gigabyte model or $699 for a 32-gigabyte model without having to sign a two-year contract, or wait until you're eligible for better upgrade pricing.

Don't shoot the messenger, AT&T says, as it's actually losing money by listening to its customers.

"Like most U.S. carriers, we offer a variety of phones that we sell below our actual cost when customers agree to sign service agreements. In general, the more a customer spends with us, the quicker they become eligible for a price break on a new device," the company explained.

Will this be enough to assuage angry early adopters?

-- Alana Semuels

Microsoft unveils yet another ad -- for Internet Explorer 8

Advertising spending may have fallen 12% in the first quarter, but Microsoft doesn't seem to know there's a slowdown. Soon after it unveiled a massive campaign for its new search engine, Bing, which features people yelling about back pain and the composer Johann Sebastian Bach, it's unveiling a new ad -- for Internet Explorer 8.

This commercial, produced by Indiana ad agency Bradley and Montgomery, stars actor and onetime Superman Dean Cain as a confused intellectual in a public service announcement trying to help overweight women share pictures of lolcats.

They're not only showing us ads to persuade us to download IE 8. Microsoft also says that if people download the browser through BrowserForTheBetter.com, the company will donate eight meals to Feeding America.

So what's so great about this new browser that's motivating Microsoft to pay for yet another TV ad in a time when advertising isn't so popular?

It gives us a new feature called Accelerators, which allow you to, say, check out a map of a location without opening a new window. It allows us to comparison shop using a search bar and restore recently closed tabs. It crashes less frequently (we'll have to see about that one).

The new features in IE 8 "accelerate the task at hand with fewer clicks and less frustration, blurring the lines between services and browser," Microsoft says in a white paper you can download on its IE site.

Now why didn't they say that in the ad?

-- Alana Semuels

One upshot of the digital transition: Live TV on your cellphone

Cellphones -- the new boob tube? Credit: masochismtango via Flickr.

You are by now perhaps a little sick about hearing about the digital TV transition that will take place Friday. The country isn't prepared, televisions will be thrown away, dozens of people won't be able to watch "Days of Our Lives" anymore. And so on.

But for San Diego-based Qualcomm, Friday marks a big opportunity. It's the day the company can finally flip the switch on FLO TV, its expensive and long-awaited mobile TV service that will broadcast about a dozen channels to mobile devices so addicts can watch live shows on their phones.

As a story in today's Times outlines, though, FLO TV may or may not be what one observer calls "one of the colossal business mistakes of the first decade of 2000." That's because Qualcomm spent more than $800 million to build a service that's available now on only nine models and only on Verizon and AT&T.

What's more, as the Open Mobile Video Coalition, a group of broadcasters developing their own standard, gets its act together, FLO TV will have a competitor that offers live TV -- for free. (Of course, they'll need to get phones optimized for the ATSC standard, which no phones in the market are, says Debra Kaufman, who blogs about the topic at MobilizedTV).

Both groups see a future in which we'll be able to access live TV in our cars, on our computers and on virtually any screen we can carry with us, all thanks to the spectrum freed up by the digital transition.

So maybe some people who rely on analog signals will be watching a lot less TV after Friday, but odds are many of us will be eventually watching a lot more. Maybe it's all part of the master plan explained by Alec Baldwin to turn our brains into mush. Or a way to get us even more dependent on our cellphones.

--Alana Semuels

Online advertising takes a hit

Online advertising was hurting in Q1. Credit: Pascale Pirate Chicken via Flickr.

Remember when Internet marketers said they'd be immune to the recession because online advertising is more accountable? Well, it hasn't quite worked out that way.

Internet advertising revenue was $5.5 billion for the first quarter of 2009, a 5% decline from the same period last year, according to a report released this morning from the Interactive Advertising Bureau.

The 10% decline from the fourth quarter, when revenue surpassed $6 billion for the first time, is the biggest decrease, percentage-wise, since at least 2001.

"The first quarter was really freak-out time this year," said Jose Villa, founder of Sensis, a Los Angeles interactive ad agency. "Everybody just slammed on the brakes."

Companies were deciding whether they should even advertise, he said, because they thought it might look bad to be spending on marketing in a tough economic climate.

"It was an unusual three-month period," he said. "It wasn’t really rational, and it went across all media."

By the second quarter, people started cautiously spending again, he said, indicating the next numbers  from the advertising bureau shouldn't be so scary. At least, that's what the IAB is hoping.

"Interactive media continues to gain share of marketing spend," Randall Rothenberg, president and CEO of the IAB, said in a statement. "We're confident that growth will resume as the U.S. economic climate improves."

-- Alana Semuels

Verizon Wireless will sell the Pre too

The Palm Pre isn't just for Sprint anymore. Credit: renaissancechambara via Flickr.

The Palm Pre, the device that was pegged to save both Palm and Sprint Nextel, will soon be available on Verizon Wireless, CEO Lowell McAdam said today. Verizon plans to market both the Pre, which will initially be available only on the Sprint Nextel network, and a new version of the BlackBerry Storm early next year. That's not great news for Sprint, which needs the Pre to keep it from losing more customers. 

"It's an incremental blow to Sprint," said Steve Clement, a senior research analyst at Pacific Crest Securities. Verizon subscribers who were thinking of switching to Sprint to try the Pre might just wait until next year, rather than jumping ship, he said.

Sprint has been struggling to reduce churn, an industry term for the subset of customers who leave one carrier for another. It lost nearly 5 million customers last year to rival carriers. 

"Sprint will have this device exclusively through at least the end of 2009," said Kathleen Dunleavy, a Sprint spokeswoman. "Beginning on June 6, customers can purchase the Pre only through Sprint. Sprint was chosen as the exclusive provider due to the power of its network, the fantastic value our offerings provide and our commitment to a great customer experience."

Sprint's most important goal with the Pre is to keep existing customers from going to other carriers such as AT&T, the exclusive carrier of the iPhone, said Ashok Kumar, an analyst at research firm Collins Stewart. This announcement won't hurt that goal, he said.

But Palm has had trouble producing enough devices to meet demand. Best Buy has already said it will probably run out of stock when it goes on sale this summer.  

"Palm thus far has been misexecuting on the production side," he said. If the device is a flop, or gets lampooned by consumers, neither Sprint nor Palm will benefit.

Sprint's stock was up 1% at $5.13 at 12:12 PDT today. Palm was up 9% at $11.49.

--Alana Semuels

Around the Web 5.27.09: the Zune HD, a Blockbuster video game rental service, Nokia's troubled app store

Is the Kutcher-Twitter love affair coming to an end?. Credit: dpstyles via Flickr

-- Microsoft says the Zune HD, a touch-screen rival to the iPod, will be out this fall. Boy Genius Report

-- The worldwide recession has created dozens of hot young start-ups in India. AP via LAT

-- Ashton Kutcher threatens to sign off Twitter if the microblogging service partners with a reality TV show. CNN

-- Blockbuster will launch an online video game rental service to better compete with Netflix. Silicon Alley Insider

-- A former TV evangelist buys AmericanLife, a Christian cable network. AP via LAT

-- Twitter's founders say they're planning to stay with the company for the long haul. Bits

-- Time Warner will reportedly decide at a board meeting Thursday whether to spin off AOL. TechCrunch

-- Nokia's app store has a terrible first day, crashing and getting routinely mocked. USA Today

-- Judge Sonia Sotomayor, Obama's Supreme Court nominee, knows a thing or two about computers and technology. Wired

-- Alana Semuels

A note to readers: We're playing around a little with the format of the Tech Blog, so this will be the last day of Around the Web -- for now. Instead, you'll see more short posts referring you to other blogs' takes on interesting tech stories of the day. If you love that idea -- or hate it -- feel free to e-mail us with your concerns. You can find our contact information by clicking on our names in the panel in the right-hand side of the page titled Our Bloggers.

Snarky reviews can sell anything -- even ugly shirts

They must be relatives of the wolves on Three Wolf Moon T-shirt. Credit: star5112 via Flickr.

When it comes to T-shirts, ugly is in the eye of the beholder. You might love your human anatomy T-shirt that shows guts, while your girlfriend might be more partial to the bright orange behemoth she bought to wear to the Lakers game.

But it's hard to dispute that the Three Wolf Moon T-shirt would be at the top of anyone's ugly list. It shows three wolves howling at a moon that is tinged by some sort of green fog, which could just be wolf halitosis. Which is why it's a little surprising that it's the top apparel item on Amazon right now. It's been one of the top 100 bestselling Amazon apparel items for 18 days now. It even beat out Crocs and an ugly baby yoga T-shirt!

The shirt, made by a New Hampshire company called the Mountain, rocked to popularity after reviewers mock-plugged the shirt.

"After checking to ensure that the shirt would properly cover my girth, I walked from my trailer to Wal-mart with the shirt on and was immediately approached by women," one wrote. Another, who also gave it five stars, commented that "Unfortunately I already had this exact picture tattooed on my chest, but this shirt is very useful in colder weather." A third wrote that after he wore the shirt, he was more popular with the ladies and that he could "expect to be promoted to cashier soon."

Nearly 500 people have reviewed the shirt thus far, with 374 giving five-star reviews. Some bemoaned that five was not enough stars.

The Mountain at first wasn't sure what to make of the comments.

"Some say: 'Bad publicity is better than no publicity at all. We however disagree if it's at the expense of others in a Classist, Racist or Prejudice manner,' " it wrote in a posting on Amazon.

It seems to have capitalized on the reviews since then, though. Its website boasts that it's the home of the "hottest shirt on-line." Mountain promises a Four Wolf Moon T-shirt is coming soon. Whether sales of other products, such as the shirt picturing a dragon wrapped around a tree, or the one showing Native Americans with their faces painted with stars and strips, have skyrocketed too is unclear.

It makes you wonder though -- who would buy a T-shirt just because it's accompanied by an ironic review? Those who bought the shirt also looked at Zubaz striped pants and a tube of Uranium Ore, according to Amazon. Maybe these people just appreciate strange things. Ugliness is, after all, in the eye of the beholder.

-- Alana Semuels

Oprah uses wireless to make a technically forbidden call

Would you want to hear her talking on the phone on your plane? Credit: adria-richards via Flickr.

Wireless on airplanes is getting its 15 minutes of fame today, when Oprah makes a call on her show to a Virgin America flight attendant who will be on a plane in the air.

There's a catch, though -- and no, it's not that everyone on the flight will get free cars. Oprah is calling the plane using Skype, the voice-over-Internet protocol service that allows you to make calls over a computer. And Aircell, the WiFi provider, doesn't actually allow passengers to use VoIP, including Skype, on any of its flights.

"We made an exception just for Oprah," said Arianne Venuso, an Aircell spokeswoman. Aircell, which is expanding to dozens of American Airlines and Virgin America planes this summer,  works by transmitting a signal from cell towers around the country to small antennas installed on the planes.

Technically, you could make phone calls with the service, and you could easily make VoIP calls over a service such as Skype. But the airlines have all request that VoIP service be blocked, Venuso said.

"The airlines know that their passengers don’t want to hear people talking on the phone," she said.

But what if that person is Oprah?

-- Alana Semuels

Palm Pre smartphone to go on sale for $200 on June 6

The Palm Pre has a touchscreen and a slide-out keyboard. Credit: whatleydude via Flickr

It's hee-eere. Well, almost. Sprint and Palm said this morning that the Palm Pre would be available in Sprint stores, Best Buy, RadioShack, some Wal-Mart stores and online June 6. It will cost $199.99 after a mail-in rebate. The subsidized price requires a two-year contract and a data plan that starts at $69.99 a month.

The Pre has both a touchscreen and a keyboard, which Palm hopes will be an advantage over other phones that have one or the other. It is compatible with Touchstone, a $69.99 wireless charger that allows you to charge the device by just placing it on the charger, rather than plugging it in.

The highly anticipated iPhone competitor is Palm's attempt to regain market share after stumbling and losing its leading position, first with the Palm Pilot and then with the Palm Treo. The Treo, introduced in 2002, was a cutting-edge device at the time, but Palm spun off its operating system to another company and wasn't able to update the device quickly enough to keep it competitive, according to analyst Tavis McCourt at Morgan Keegan.

In the first quarter of 2006, Palm’s operating system had a 40% share of all smartphone devices in the U.S., compared with BlackBerry’s 28%, according to Nielsen. By the first quarter of 2009, Palm’s share had fallen to 10%, while BlackBerry's grew to 36% and Apple’s grew from zilch to 21%, thanks to the iPhone.

The Pre runs on WebOS, Palm's new operating system that ...