Silicon Valley has been abuzz over an emergency meeting that Sequoia Capital called for its portfolio companies on Tuesday. VentureBeat now has the slide show presented at that meeting, thanks to a kind tipster.

Sequoia, one of the top venture firms in the Valley, reportedly called a similar meeting when the dot-com bubble burst. Like Ron Conway did in an e-mail message to his portfolio companies earlier this week, Sequoia is bringing back messages it sent to entrepreneurs in 2000.

Despite some amusing slides (like a knife jabbed into a dead pig’s head), Sequoia’s message is dire. Sequoia partners presented a long analysis of how the United States economy got to this point. It is not a “normal crisis,” they warned, and it will take a long time to emerge from it. They reminded entrepreneurs that tech spending depends on the economy and that e-commerce and advertising are already deteriorating.

They made sure that entrepreneurs understand the new realities they face, like smaller fund-raising rounds, customers that are slow to sign on to new services, fewer acquisitions for smaller sums and a very long road to an initial public offering of stock. They repeated their advice to start-ups: cut costs, get profitable and “spend every dollar as if it were your last.” They said it would be the survival of the quickest — as in, the quickest to slash expenses.

The final message: “Get real or go home.”

I recently spoke with Matthew Howard, a general partner at Norwest Venture Partners, and Promod Haque, a managing partner, about the 47-year-old firm’s international investing strategy.

Most Silicon Valley firms invest globally these days. Many raise separate funds — one for start-ups in the United States and others for start-ups in other countries, such Accel’s India fund, which it closed in July, or Intel Capital’s China fund, which it closed in April. Norwest has taken a different approach, investing in the United States, India, Israel and China out of one global fund.

The firm’s tenth fund, for $650 million, is its first officially global fund, though it began scouting opportunities overseas in 2002 and made a few bets before it began investing the current fund.

Investing out of one global fund versus separate country funds might not seem like a major distinction, but the partners said it made a big difference in terms of the resources the firm brought to each of its portfolio companies and decision-making within the firm. Most of all, “it’s a great sales pitch to entrepreneurs,” Mr. Haque said. Read more…

Ron Conway, an icon of the Internet economy and an angel investor in some 130 start-ups, has sent an e-mail message to his portfolio companies with a stark message and advice from 2000. Though he said that while he would continue to invest and he believes that innovation in Silicon Valley will continue to thrive, young companies with little cash on hand must be proactive about cutting costs and plotting a survival strategy.

Mr. Conway’s message to entrepreneurs is a bit self-serving, focusing on preserving the value of the portfolio company to investors and buyers as opposed to protecting employees’ jobs. And it complements the advice that venture capitalist Mike Kwatinetz just gave to his fellow V.C.’s: take advantage of market weakness to buy cheap stakes in good companies that need the cash.

Following is the text of Mr. Conway’s e-mail statement: Read more…

Sure, the economic virus is spreading to venture capital. But venture firms should not fret. Instead, they should take this opportunity to buy low and, when this all ends someday, sell high. That’s the advice of Mike Kwatinetz, the general partner at Azure Capital Partners, who invested in Bill Me Later during the depths of the last downturn — and sold it to eBay Monday for $945 million.

Azure first invested in Bill Me Later, an online payment company, in 2001, a year after it was formed as a spin-out from Nortel. The tech bubble had burst. Then, as the firm was completing the deal, 9/11 hit. It all made for a great time to invest, Mr. Kwatinetz said. Azure got in when Bill Me Later had a valuation in the low $20 million range, and when it sold this week, it returned them five to seven times their money, he said.

Now, in the early days of a new downturn, he advises venture capitalists to pull out their wallets. “People tend to be more fearful during the downturns, so what you’ll find is the number of investments that V.C.’s make will go down,” he said. “But it’s actually the best time to invest, not the worst time.”

Here’s why, according to Mr. Kwatinetz: Read more…

An Internet advertising start-up, Appssavvy, said on Tuesday that it had raised $3.1 million in venture capital and signed up NBC as a client. Appssavvy — which sells ads that run alongside applications and widgets on social networks and other Web sites and on devices like the iPhone — is expanding during a rocky time for Internet advertising.

The nine-month-old company raised its Series A round of venture capital from TRUE Ventures and Scott Kurnit, an angel investor and the founder of About.com (which is now owned by The New York Times Company). NBC recently chose Appssavvy to be its sales team for an iCue Facebook application it plans to unveil next month. ICue, which The Times wrote about in June, is an online education venture from NBC that will use video from the NBC News archives.

Chris Cunningham, Appssavvy’s chief executive, said he started the company to connect the engineers who were making applications and the brands that had no idea how to advertise on those applications. “Agencies and brands were asking for help, and applications were saying, ‘We don’t know anyone on Madison Avenue,’” he said.

Mr. Cunningham plans to use the money in part to hire new ad salespeople and finish building a system that will let brands and ad agencies search for relevant applications. For example, they will be able to find all the applications on Facebook that target men age 18-34, he said. Read more…

Despite all the other products we now buy online, Web sites selling wine have struggled. Consumers don’t automatically think of the Web when they want to buy wine, and labyrinthine laws complicate the shipping of wine between states. During the dot-com craze, several wine e-commerce start-ups were born and died.

A new start-up, AmericanWinery.com, is betting that the time for online wine has finally arrived.

The site, which was founded in 2007, has the requisite Web 2.0 tools for wine aficionados. Winemakers can post their tasting notes and tips for tourists who want to visit their vineyards. Wine drinkers can buy, rate, review and discuss wine. A blog offers recipes with wine pairings and interviews with winemakers, and a wine encyclopedia defines terms from “abboccato” to “zinfandel.”

AmericanWinery.com’s founder, Lloyd Benedict, is also tapping into the latest foodie craze: buying local. Three-quarters of the 435 wineries that sell on the site are small vineyards that produce fewer than 1,000 cases of wine each year and sell in few or no stores. These winemakers don’t have other ways to reach customers beyond those that visit their tasting rooms and don’t always have the resources to set up their own e-commerce sites, said Mr. Benedict, who wears a “Support Your Local Winemaker” T-shirt to trumpet the cause. Read more…

(UPDATED 6:18 p.m. to clarify Skype purchase price.)

The Dow is crashing. Banks are failing. Unemployment is rising. How does eBay react? It is getting into the consumer lending business.

On Monday, eBay agreed to spend $945 million to buy Bill Me Later, a venture-backed company that offers people instant credit to make purchases at online sites.

In its statement announcing the deal, eBay doesn’t really call Bill Me Later a consumer credit company. It calls it an “online payments business.” But if you read eBay’s slide show to investors, you see that Bill Me Later earns four times more money from the interest and fees it charges to customers who borrow money than from the fees it charges merchants for handling the transaction.

Bill Me Later is very much like a credit card without the card. If you pay the bill within a certain amount of time (which varies according to promotions), there is no interest. But pay less than the full balance, and …well, you know what happens then.

In many ways, the deal is a strategically wise investment for eBay. Anyone making a payment through PayPal can receive an offer to apply for a Bill Me Later account. Not only will that help get more borrowing customers, it will also reduce one of PayPal’s biggest costs: the fees it pays to process credit cards. The deal may also help PayPal extend its reach into larger merchants, which have been Bill Me Later’s main customers. Read more…

Despite the dreary news for venture-backed start-ups hoping to go public, some venture capitalists are optimistically looking forward to the day the public markets open up again.

But what will happen when the pipeline eventually does open? Venture investors are worried that, when companies that are lingering in the I.P.O. pipeline eventually do go public, returns will take a severe hit.

Many think start-ups won’t have a shot at an I.P.O. until 2010. If the United States is in a recession that lasts through 2009 and if the credit markets remain closed, only a very high-profile company would be able to make its debut, said Scott Sweet, senior managing partner at I.P.O. Boutique, a research and advisory firm for individuals and hedge funds. However, he added, “the I.P.O. market is highly dynamic and can change on a dime.”

Venture investors who had planned to take companies in their portfolios public this year are left spending money and time keeping these mature companies alive, instead of investing in new start-ups. Many are raising small funds to add on to their existing funds because they have realized that they will need to spend much more on their current crop of start-ups than they had expected. Read more…

From our friends at the Green Inc. blog:

Global venture-capital investments in clean technology rose 37 percent in a year, to a record $2.6 billion for the third quarter (July through September), according to the Cleantech Group, a research firm. Companies involved with smart-grid applications, algae and thin-film solar had a particularly good quarter.

And while some analysts are optimistic about clean energy’s ability to weather the current storm, the Cleantech Group — whose numbers cover North America, Europe, China and India — expects a fourth-quarter pullback as financial conditions deteriorate and even venture capital companies close their wallets.

The clean energy industry needs huge amounts of capital. Unlike many of their dot-com predecessors, solar or biofuels companies are hardware-intensive (think factories and large-scale equipment), rather than software-driven. And while clean energy funds have swelled in recent years, companies that need to raise more capital, or that had hoped for an initial public offering, may run into trouble.

“With the I.P.O. market basically being closed for a long time, you might get a bit of backup in the system,†said Bruce Jamerson, chief executive at Mascoma, a company that is working to commercialize cellulosic ethanol and has backing from Khosla Ventures, Marathon Oil and others. Read more …

Data is a buzzword in venture capital. Entrepreneurs have built Web tools and users log on and leave trails of data behind. The next step is figuring out how to use all that data.

StarVest Partners is one of the venture capital firms that has made data a new focus area. The New York firm has made its name investing in software-as-a-service companies, including NetSuite, which was co-founded by Oracle’s chief executive, Larry Ellison. It went public at the end of 2007.

The next generation of companies will figure out what to do with all of the data, said Deborah A. Farrington, a co-founder and general partner at StarVest. She calls it data-as-a-service.

Web technology is cheap and easy to build these days, so data is what gives companies a proprietary advantage, said Larry A. Bettino, the StarVest partner who focuses on companies that use data in new ways.

The firm’s poster child for data investments — and the reason it has miniature red and green tractors in its New York conference room — is Iron Solutions. Read more…

The capital crisis for venture-backed start-ups continues, according to the quarterly exit-poll report by Thomson Reuters and the National Venture Capital Association, released Wednesday.

In the third quarter, only one venture-backed company, Rackspace Hosting, went public. Its shares are down 15 percent since then. A biotech company, Fluidigm, came close but withdrew its registration in the wake of the meltdown on Wall Street. In the first three quarters of 2008, only six technology and health care start-ups have gone public, the lowest volume since 1977. At this point last year, 55 had staged I.P.O.s.

Acquisitions, the other method for investors to cash out of start-ups, are only slightly better. Fifty-eight venture-backed companies were sold in the third quarter, compared with 102 in the same period last year. The quality of those deals also fell. The average deal size in the third quarter of this year was $146 million, compared with $208 million last year. Read more…

Lehman Brothers Venture Partners, the venture-capital arm of the bankrupt investment bank, is in late-stage talks to spin off as an independent firm, VentureWire’s Tomio Geron reported Tuesday.

The venture fund is part of Lehman Brothers Holdings, the bank’s investment-management division. Bain Capital and Hellman & Friedman agreed Monday to buy most of the businesses within that division. The venture arm, however, chose to remain independent and is in talks with its limited partners and secondary firms to buy out Lehman Brothers’ stake in the fund. It would become a stand-alone venture firm with approximately $800 million in assets.

A partner at Lehman Brothers Venture Partners sent an e-mail message to its portfolio companies and other venture firms, VentureWire reported, and a recipient who asked to remain anonymous forwarded the e-mail to VentureWire.

Lehman’s venture arm was established in 1995 and, according to its Web site, had raised $1.1 billion in committed capital and had invested $717 million in more than 80 companies. Those start-ups include Kayak, the travel search engine; TeleNav, which offers location-based services for mobile devices; and Fluidigm, the biotech that was forced to withdraw its I.P.O. registration last week. Read more…

The “Maltese Falcon,” Tom Perkins’s mega-yacht (Credit: Luca Zennaro/European Pressphoto Agency)

In the exclusive world of grandiose yachts, the Maltese Falcon of Tom Perkins may be the most grandiose of all. On Saturday, it arrives on American shores for the first time, sailing into San Francisco Bay.

Mr. Perkins is a legendary Silicon Valley figure. At Kleiner Perkins Caufield and Byers, the venture capital firm he co-founded in 1972, he made millions financing companies like Netscape and Genentech when they were still young. He has recently made headlines as the Hewlett-Packard director who resigned from the board in 2006 after discovering the corporate spying scandal. He is also Danielle Steel’s ex-husband.

The Maltese Falcon is, when measured at the water line, the longest privately owned sailboat in the world, according to David A. Kaplan, who hung out with Mr. Perkins and wrote “Mine’s Bigger: The Extraordinary Tale of the World’s Greatest Sailboat and the Silicon Valley Tycoon Who Built It.”

Jim Clark and Barry Diller claim theirs are longer when counting the bowsprit, which sticks out from the front of boats, but that is not the standard industry measurement.

“The issue of length is important to all these guys, and the way you know that’s the case is how often they tell you that length is not important,” said Mr. Kaplan, who sailed on the Maltese Falcon on its maiden voyage from Istanbul, where it was built, around the Greek Islands to the French Riviera. Read more…

UPDATED 4:05 p.m. with comment from Fluidigm.

Fluidigm, a venture-backed biotech company that planned to go public last week, has withdrawn its initial public offering because of “the historical instability in the market,” the company said.

The company, based in South San Francisco, had planned to make the offering, underwritten by Morgan Stanley, on Sept. 18. Shares were expected to be priced from $14 to $16 and the company hoped to raise $70 million to $85 million.

The week that Fluidigm hoped to go public was one of the most tumultuous in market history, with Lehman Brothers’ bankruptcy, the sale of Merrill Lynch and a freezing of the credit markets. Fluidigm decided to postpone its offering and Morgan Stanley moved it to day-to-day status.

On Thursday, the company formally withdrew its I.P.O registration. Read more…

Just as venture capitalists measure a start-up’s financial performance to gauge the success of their investment, venture philanthropists — those who make grants using venture capital strategies — want to measure the impact of their charitable contributions.

Yet figuring out how exactly to measure social impact has long been a challenge for philanthropists.

A new Web-based software program, unveiled Thursday at the Clinton Global Initiative in New York, aims to help foundations and grant makers solve this problem. It sets benchmarks for measuring social impact, tracks grantees’ performance and compares their performance to other nonprofits doing similar work.

The software, called Portfolio Data Management System, was developed by Acumen Fund, a venture philanthropy organization, with the help of engineers from Google. Salesforce.com, which makes Web-based software for businesses to manage their customer relationships, will distribute the new tool.

“In the social sector, we’re still really grappling with many of the aspects of what it means to track social value and performance,” said Jed Emerson of Uhuru Capital Management, who has been a leading thinker on how to measure social investments. “This has the potential to be very significant.” Read more…