The May Report: 1/11/2012:I’ve been writing this since the week between Christmas and New Year’s and it’s about time I actually delivered on endless empty promises for reports to come, so chew on this while you sip your morning coffee and munch on a crisp sesame seed bagel with cream cheese as I do the table of contents for the next report: 100 Things I want to know before I die
Editor and publisher: Ron May, ron@themayreport.com, ronaldmay@aol.com,www.themayreport.com, 773-525-3944.

If you missed an article, go here:
www.tmronline.com/A55951/tmrarticles.nsf/vwFullNewsletter

(ALL REPORTS HAVE NOW BEEN POSTED ON THE TMRONLINE.COM SITE AND THANKS TO PROMINIC FOR FIXING THE PROBLEM)

Otherwise, just go to www.themayreport.com where all the articles are archived and the search function on the new site is now working

Louis Brandeis: “Publicity is justly commended as a remedy for social and industrial diseases. Sunlight is said to be the best of disinfectants.”
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Rebuilding America with Advanced Manufacturing

January 17th

Currently, MIT’s own President, Susan Hockfield has been involved in President Obama’s Advanced Manufacturing Program to rebuild America.

Here is a link to a video presentation of a recent program hosted at MIT
web.mit.edu/newsoffice/2011/advanced-manufacturing-partnership-regional-1130.html

Join us on January 17th to find out this directly affects us and how manufacturers locally are using advanced manufacturing processes to expand their capabilities and employee a new manufacturing workforce.

Our panel will include:

Moderator Mike Johnston, Director of Business Development for IL MEP Network

Professor Greg Olson, The Walter P. Murphy Professor of Materials, Science and Engineering at Northwestern University and an MIT Alum.

Karen Huber, the Division Manager for Manufacturing Technology R&D at Caterpillar Inc. and currently on Obama’s Advanced Manufacturing Council.

Guy Cassidy, COO Acme Manufacturing

Time: 5:30 – 8:00 p.m.

This is your opportunity to directly ask the hard questions to the people that are working on the answers.

Location IBM Innovation Center – 71 S Wacker, Chicago, IL 60606

Fee: $10 for members in advance $20 at the door

$35 for non-members in advance $40 at the door

REGISTER NOW!

www.mitefchicago.org/content.aspx?page_id=87&club_id=375711&item_id=189578
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TABLE OF CONTENTS

The Scoop section:

– Briefly noted: 100 Things I want to know before I die, by Ron May

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The Scoop section:

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Briefly noted: 100 Things I want to know before I die, by Ron May

1. What really happened at Advanced Life Sciences? Where is Michael Flavin? What happened to the missing $75MM? And how did Dick Reck, Tom Thornton, Scott Meadow, and Terry Osborn get on their board? Furthermore, who on earth was advising them to ignore the FDA requirement that their clinicals include comparables with other products on the market? That, my sources say, was a rookie 101 mistake.

2. What is the real story behind the fire that killed Mark and Shelley Gordon and their son’s death a year later? Did their son commit suicide as I was lead to believe in one or two calls I received? This was neither confirmed nor denied by Scott Glickson when I questioned him. And did their son have something to do with the fire starting? There was an investigation but the results were kept very hush hush.

3. Is David Weinstein still being paid by the i2A Fund since he was a co-founder? If so, what is he being paid? And why?

4. Where is Weinstein now and what really happened to him other than the two D’s: Divorce and Drugs? Speaking of David, where is Dever these days and where is Rick Shamberg and what are they doing? Dever was hanging out in Barbie Adler’s office a few years ago. Were any of the blarney stories Dever told me true? Did Dever really break into the apartment of a woman living in his building or the building next door and rifle threw her bureau drawers for pornographic pictures as he told Jeff Meredith? That’s just one of many stories I’ve heard.

5. Was Neil Kane really canned or about to be canned at Advanced Diamond Technologies when he left on or about March 25, 2011?

And if Neil took the venture funding ADT got “90% of the way” as the VP of Marketing at ADT told me, then why was he canned? And what does that statement mean anyway?

6. If Neil was not canned, why did Bob Geras never come to his defense? Has Bob been quiet about what happened to protect Neil or himself or both?

7. What was the settlement amount for Sports Publishing Versus Eric Lefkofsky and where is Daniel J. Pope, the lawyer in Urbana Illinois who sued Eric and company, who has disappeared? Why, if there was no merit to the case against Eric, et. al, did they settle so quickly?

8. Since the ITA only ended up getting paid $320K out of the $500K (or more) they were promised by the ITDA board, what happened to the other $180K?; how much severance did John Noel walk away with?; and is it true that David Weinstein engineered the ITDA/ITA deal behind the scenes? And who is to blame for what turned out to be a fiasco? Fred and Terry? The ITA board? The ITDA board? Shouldn’t Dick Reck and Scott Glickson who sat on both boards shoulder the bulk of the blame? BTW, where is the letter of apology to me from Dick Reck, Scott Glickson, Fred Hoch and Terry Howerton for acting as though I was crazy to vociferously question the whole deal? Well — I won’t hold my breath on that one.

9. How many of the 150 or so ITDA members who were merged into the ITA are still members? And is it true, as Jay Marhoefer told me, that the ITA has made little or no effort to accommodate the non-IT firms and people? Did Amy Francetic of the Clean Energy Trust effectively bail them out by picking up the slack in the coverage of the energy sector?

10. What percentage of equity or ownership does the Polsky Center have in GrubHub.com? And how do they avoid dilution?

11. What really happened between Mark Tebbe and Troy Henikoff at OneWed.com? Was there financial mismanagement as tat one note alleged?

12. Did Mike Rhodes have some sort of substance abuse problem? Is he a scam artist or an honest guy who got himself into fix or something else? What were the provisions of the contact he had tenants sign that were not rent related? I still have not been able to get a look at that contract. What is Rhodes doing now? My most recent information from another person close to the situation is that the rent was not paid by Rhodes to the landlord, but the tenants did not know that and when they found out from the building owners/management, they were furious and that was followed by offers for new leases from the building, etc. That info. essentially confirms what I had heard and reported. I saw Rhodes twice since the end of February of 2011, once at Built-in Chicago and at the CEC dinner on October 6th.

13. How much money is Matt Moog’s firm Viewpoints.com making? If it is not doing all that well as I’ve heard, why does Matt spend so much of his time on a Founders’ Fund, Built-in Chicago and the up-coming Tech Center rather than following Adarsh Arora’s lead and bowing out of running organizations on top of his own firm? And speaking of Adarsh, how is Athena Security doing and where is Adarsh these days? At any rate, what is Matt Moog’s real objective and game?

14. Did Alexi’s state treasurer’s office take the business plan presented by Jon (John?) Pool on October 16, 2007 at the Thompson Center and pass it along to Russell Gottesman and his wife Katie Hill? Russell and Katie founded Commuter Advertising.

15. Did New World Ventures pull political strings to get the chance to invest $20MM in Facebook?

16. What is the real story on Nancy Sullivan at UIC’s OTM? Is she really that political? Why have so many people left? Did she really tell Dr. Connie Cleary in front of others that she knows how to hold a grudge? Did she really tell Mike Isaac that he was required to take his cell phone to the bathroom? And did she tell Rachel, who was the internal office manager, that she could not use her JD title because it made her appear to be too important? Did she re-hire Jeff Norgle after he quit? Did she use Norgle as a scapegoat for her own mistakes in decision making? Was there politics in the choice of professor David Carley who was given the “inventor of the year” award? And is it just coincidence that professor Carley’s work was being handled by “sycophant in chief” Jeremy Hollis? How does Nancy keep all the HR complaints under wraps and what is her relationship with Jamie Painter? Why is consultant Jim Lynch being given the red carpet treatment when Mary Dicig had fired him? Nancy’s kiss up kick down attitude or “smile on the face and kick in the shin” attitude is not unusual, if that’s really what it is, but the sheer number of people who have a beef with her is far less common. What about the public humiliation of Colleen Glascott as she was being let go — was that really necessary Nancy? Why did Mike Bohlman leave recently?

Given the story in the Chicago Tribune about the resignation of Lisa Troyer Friday Jan. 6th, 2012, UI president Mike Hogan’s Chief of Staff, while she is under investigation for sending anonymous emails to members of the faculty Senate Conference which is debating the contentious issue of enrollment management changes, and given Mike Hogan’s supposed desire to clean things up at UI, why hasn’t there been any investigation of Nancy Sullivan’s operation by Larry Schook?

17. Why did Margo Georgiadis really quit Groupon to return to Google with all those options in hand? And why are lower level people who left being sued for taking and possibly using competitive information while Margo is completely left alone even though she had a tremendous amount of competitive information.

18. Is Andrew Mason happy there and will he be gone sometime in 2012? What does he really think of Eric and Brad?

19. Who picks Howard Tullman’s art collection for him and how much has he spent on it? Why is he going out of his way to display it on his site?

tullman.blogspot.com/2011/12/tullman-collection-artwork.html?spref=fb

20. Why haven’t Michael Krasny and Casey Cowell stepped up to the plate and done more angel investing?

21. What does Bob Bernard’s death certificate say his cause of death was? What really was his cause of death? And was he being booted out of his firm just before he died? Will I ever get to see a copy of the book The Ides of marchFIRST written by well placed insider Marcello Jose Falken Benati which he says was buried with Bob when he died — hence, supposedly, no copies exist.

But the story of how Bob’s widow came to possess the putative only copy of that draft for the book The Ides of marchFIRST deserves to be told. Bob was pulling H-1 visas and Marcello who was from Brazil was very much at risk. He knew Bernard and his operation well so he went to Bob and negotiated a deal. One could call it high stakes poker, blackmail or even extortion, but it was at least hardball.

Benati wrote the book in exchange for Bob’s agreement not to pull his visa. Now I am not clear about exactly how this negotiation took place. Did Marcello cut the deal up-front, before the book was written?

Did Marcello write the book first, then realize that he had a bargaining chip, so he approached Bernard when he was backed into a corner or thought he would be, so it could have been a preemptive move?

Was the whole “chess game” planned out in advance by Marcello who is pretty good at tactical and strategic maneuvers?

The intrigue here drives me crazy. The bottom line is that a book was supposedly written and the only extant copy was given to Bob’s widow and which was probably destroyed.

Bob Bernard did read the book, according to the story Marcello told to me when we ran into each other at the Up Down last fall. And don’t hold me to this, but my memory is that when Bob read it, he suggested to Marcello that he better not publish it — or else!

Now I don’t expect Benati to say anything publicly one way or the other about this story, confirming or denying. And of course, Bob cannot be reached for comment.

The whole story has a patina of cloak and dagger, but I did question Marcello about whether he kept any copies and he emphatically and repeatedly denied to me that any copies exist.

What else would one expect him to say?

22. Was Tom Thornton really destroying files and shredding documents? Was he keeping two sets of books? Did he ever engage in kickbacks and other slimy practices? What was Tom thinking when he married Lindsay, one of his employees , gave himself a $107K bonus on top of a $265K salary and gave Lindsay a bonus on top of her salary?

What really happened between Tom and the woman who worked for him at the KBA who is suing?

And what was Tom thinking when he fired Christine Aston Morse here in Chicago at the ITDA when she was eight month’s pregnant?

23. What is Thornton’s current salary in Cleveland? Do the people at the Cleveland Clinic start-up incubator know about his past? And btw, who sent the emails to TMR about Thornton’s plans to leave the ITDA to take the job at the KBA in July 2006?

This note, for example.

tinyurl.com/753h8sx

What really happened with Cary Nourie being canned by John Noel at the ITDA and then hired by Thornton at the KBA?

Was Nourie a Thornton friend or foe or a double agent?

What about Chris Tynan on that score?

While I’m on the topic, what did Nancy Sullivan think of Tom and what did she learn about management from him?

24. Did Thornton really tell people in his KBA office in March of 2011 that “someone needs to take care of Ron May”? When will the forensic audit of the Kansas Bioscience Authority be finished and when will the results be made public? What is the Johnson County DA doing on the investigation or has it been dropped?

25. How much is Stuart Larkins being paid to run the i2A’s 2nd fund? How much is Kapil being paid? And is Stuart Larkins an extension of the cloistered inside crowd tied to Kevin Willer, Troy Henikoff and Matt Moog? Want my evidence? On January 7, 2011, we published the Angel List that Melanie found and Stuart Larkins who had worked for Performics and then Google wrote that he co-invests with “with Lon Chow, Jamie Crouthamel, Matt McCall, Matt Spiegel, Alan Warms, Kevin Willer.”

As they say in logic, QED. I rest my case. My question is will i2A investments under Stuart Larkins follow his personal angel investments or those of his buddies?

So, if i2A has not already put money into these firms, let’s watch what he does with these firms which he’s already personally invested in: Aggregate Knowledge, BrightTag, Inadco, MightyNest, Optimine Software, Performline, readMedia, Sycara, TapMe, and Trada. Of those firms, the i2A Fund is already invested in BrightTag and TapMe.

26. Why did Jason Fried really leave the Groupon board? Was he too much of a competing influence on Andrew Mason from Eric’s point of view, especially in Jason’s ascetic philosophy about how to build a firm versus Eric’s Mongol Horde approach?

27. Is Groupon perceived as a technology firm by gurus in Silicon Valley? Or as a sales and marketing firm?

28. What is Jeff Willinger’s compensation plan and how long will Right Point Consulting hang onto him? Is he just a door opener or has he ever actually closed a deal for them?

And while I’m on the subject did Jeff say to bartender Angie Jackson, who describes herself as a “mixologist” at the SMCC holiday party on December 8th that “This is my event. I can do whatever I please. Do you want to take this outside?”

Angie says she has a couple of witnesses to Jeff telling her this. Jeff says he would never said such a thing, especially not to a woman. He also told me that she may find herself unemployed. Aside from the somewhat misogynistic and condescending under tone in Jeff’s remarks, along the lines of “she’s just a bartender” along with “she’ll be an unemployed bartender,” — the implication being that Jeff would have her fired (I doubt that he could make that happen) — and his whole “bad attitude,” according to Angie, did Jeff mislead the Tribune Museum about the hours for the event by telling building management that the event would go until 7:30pm, not 8:30pm? And what was he “discussing” with the woman from the building when I was there toward the end — taking out the trash or who would pay for the extra staff expense?

Angie helped me get a cab and as she was putting me in the cab she told me that she hates Jeff and she gave me her card with her number and she told me to call her which I did the next day.

There are more questions, but that is enough for today.

I have a whole ditty about this in my files that is actually funny, but I have to find it.

BTW, not having seen Michele White Beaulieux in years, I was surprised to run into her at the SMCC party while she was outside talking to Sonny Cohen from Duo Consulting. I was more surprised that her marriage a few years ago to an engineer, Mr. Beaulieux, did not last. Michele waited so long to get married that I figured it would last. I forget what Michele does, but she did mention that she visited former University of Chicago poli sci. prof Jane Mansbridge at Harvard, where she now teaches.
I wrote more on this, but cut it for now and will run it soon.

29. What does David Dalka actually do for a living? How does he pay the rent?

30. When will Bob Geras have his next exit? What company will it be?

31. What really happened between Jon and Geoff at TechWeek (or Tech Week)? BTW, they changed the spelling from Tech Week to Techweek, one word, with a small “w.” Who split up with whom? And why did Danny Bloomfield leave?

Well, I found out tonight, Sunday January 8th.

1. Ed Domain’s article was wrong. I spoke for about 20 minutes to Jon Pasky on the phone tonight at about 9:30pm.

2. There are now two companies, both co-owned. They are Techweek, Inc. and Data 2.0, Inc. There may be a subsidiary relationship but Jon said they are not specifying which firm is the top one. Call it a joint venture, partnership, co-ownership set-up.

Geoff Domaracki is now out in San Francisco running Data 2.0, Inc. and they have one full-time person (Geoff) but he has partners he’s working with.

Techweek is here at 222 W. Hubbard in a big open room like Groupon has, along with the CEC people, and the i2A with Kapil Chadhaury and Stuart Larkins. Kapil runs the i2A Fund #1 and Stuart will run i2A Fund #2.

Jon was running the numbers and Techweek now has six full-time and three part-time people.

Danny Bloomfield did leave and I suspect he was Ed Domain’s source for reasons I won’t get into now, but Danny, loose lips sink ships. Danny went to work for UserVoice.com, uservoice.com/about, one of the Techweek sponsors and he is out in California.

The Data 2.0 Summit is scheduled for April 3rd at the Mission Bay Conference Center.

Check the site:

www.data2summit.com

They also have a conference planned for October, www.data2con.com

Techweek is scheduled for June 22 to 26, 2012 and they are still taking applications for speakers which has been extended until January 18th, Jon said.

Go to www.techweek.com/conference

My suspicion is that Techweek is the dominant or parent firm because when you go to www.data2summit.com site, it has Tech Week right above Data 2.0.

They did the split because they realized the importance of data, Jon explained.

How much angel money did they get? I threw out the figure of $500K, and Jon said that they are not disclosing the amount but he also said he would not confirm nor deny that the figure is in the range.

Who funded them? Jon said that the angels do not want to be named. When I asked him if I might know them, he said I might. That conversation was somewhat tongue in cheek because I joked that if a mini van containing Kevin Willer, Matt Moog, Brian Hand, Troy Henikoff, Howard Tullman, JB, McCall, Brad and Eric went over a cliff, there goes the Chicago tech community — which has about a dozen (really about 30) key high visibility players.

I asked Jon about my fave Hermione Way. Remember, she sat on my lap — a few times at TechWeek in July. She’s out in California with The Next Web (www.thenextweb.com), a video firm. I wrote more, but that ran in the report I put out two days ago.

32. What was the real reason that Mark Gordon did not like Lynne Baker?

33. What is Melanie Adcock doing these days? No one I’ve talked to has heard anything.

34. Is Logan LaHive’s Belly.com getting data through the back door from Groupon?

35. Are we now, in the post Groupon IPO era, entering a take-off point for the whole tech industry here or was Groupon basically a one-off? The panel at the CEC December 14th event cautioned that we should not expect to see Groupon’s success repeated any time soon, but Matt Spiegel predicted two tech IPOs in 2012. Well, he may be proven right already. Just a few weeks ago, Aircell which changed its name to GoGo recently, filed its S-1 which states that they are going to raise $100MM. venturebeat.com/2011/12/23/gogo-ipo/

Now $100MM is a real number rather than the Alice in Wonderland Groupon figures. TrustWave postponed its IPO in September but they may be re-igniting their IPO plans soon. That would be two IPOs in hand, with lots of other possibilities like GrubHub, maybe Cleversafe, and I really don’t know what else. Fred Hoch thinks there are four others but he wouldn’t tell me the names of the companies. I’d start by taking a close look at the ITA membership list.

36. Has anyone on the board of the ITA ever openly challenged Terry Howerton on his checkered financial past and present? Has any board member other than Terry ever called angel investor Roger Murphy in England or former employee/colleagues Brian Shoffner (in KC) and Jason Accola in Chicagoland? Was any due diligence ever done on Terry by any ITA board member?

If not, why not? Aren’t they curious? Don’t they see it as part of their governance and fiduciary job as board members?

On a broader level, aren’t my buddies Dick Reck and Scott Glickson really poster boys for the “get along go along” and “don’t rock the boat” culture here?

And is that culture predominantly a Chicago thing or is it ubiquitous in the U. S. or for that matter, the world?

37. What is the real story on Jason Jacobsohn and all the jobs he’s had? Why did he tell me that he has repositioned himself several times in the last couple of years? what does he actually do for a paycheck?

38. Big picture question: Is there really a flurry of investment activity in Chicago if we leave out the two dozen or more start-ups that Lightbank has funded?

39. Is JB Pritzker and his “gang” including Kevin Willer, Brian Hand, Matt Moog — and I’d even throw in Howard Tullman (but Howard’s constitutionally pretty much of a lone wolf) — afraid that Eric Lefkofsky and Brad Keywell have grabbed the bull by the horn and are now stealing the limelight so the “Pritzker gang” is now launching their own initiatives (i2A second fund, Founders’ Fund, Tech Center, etc.) to counter Eric and Brad?

This scenario reminds me of Pritzker’s reaction to Flip and divine interVentures. Even though Flip had been around for years with Platinum technology, when he started divine, he did it boastfully and bombastically with much fanfare that he was the new sheriff in town. JB met with Flip who was very late for the meeting and Flip was driving a garish red car. It was to some degree a social class thing. Flip was proud to be the nouveau riche en.wikipedia.org/wiki/Nouveau_riche

guy with the boorish manners (hey, I relate to that last part about being boorish) and JB was the epitome of classy old money. But more than anything, I think it was not so much Flip’s low or no class in those days as it was his desire for total domination of the local scene which did end up having deleterious effects. Howard Tullman, Len Batterson and others shard JB’s concerns. Remember Goose Island? Jerry Mitchell always thought that Flip bought political connections and a Rolodex to start-ups by hiring Tom Thornton who then brought in folks like Aaron Rudberg.

I see a parallel between Flip from 1999-2001 and Eric and Brad in the 2009-2011 period.

That would explain what I’ll call the counter insurgency lead by JB.

There are serious business ethics and practices issues with Brad and Eric dating back to Brandon Apparel and Starbelly followed by the Ha-Lo disaster. JB and Lon Chow and Matt McCall know this, but they always praise Lightbank’s investments in start-ups to the general tune of $1MM per deal (initially).

Watch carefully what they say and especially what they DON’T SAY.

Praise for Groupon is always very cautious, conditional and steeped in “astonishment” but praise for Lightbank is far more lavish and unqualified.

But when it comes to Lightbank, local VCs have told me that they wish others like Michael Krasny and Casey Cowell had done and would do more.

40. Is the “two gangs model,” basically Brad and Eric vs. Everyone Else with the most visible names being JB Pritzker, Howard Tullman, Matt Moog, Troy Henikoff and coming onto the scene much more visibly since April 2011 being Kevin Willer, the correct model to explain what’s going on?

Or is it that we’re one big happy family with no divides now that serial dividers like Weinstein and Thornton are gone, with no fiefdoms and no empire building?

Or is it closer to Wally Cornett’s idea that angel investing is fragmented and splintered like a floating craps game? No doubt that there has been consolidation and standardization since the days when Bill Weaver and a few individuals like Bob Geras or Steve Miller (as an angel) ruled the roost. Some people do float from one group to another, but there seems to be a coalescence around about six or seven groups: Lightbank, Sandbox, Heartland, HPA, Wildcat Angels, OCA, New World Ventures’ seed capital investing, i2A’s first fund which is not doing new deals now, Michael Gruber’s fund; and what has been a loose affiliation of individual angels like Lon Chow who has personally invested in BrightTag, BringIt, Local Offer Networks, SeniorHomes.com, Solmentum, TapMe, Viewpoints Network, Yidio, YCharts; Matt McCall (who is also a VC along with Lon Chow), Kevin Willer, Troy Henikoff, Matt Spiegel who is now with TapMe Games, Tim Carroll, Ryan Jeffery, Thomas Ryan, Lauren Flanagan who has invested in at least 30 firms, Alan Warms, Tim Krauskopf, Jamie Crouthamel, Bob Geras, Stuart Larkins who says he’s a $25K to $50K per deal angel investor; Sam Yagan, Brian Hand, Chuck Templeton, George Deeb, Brendan Condon who says he does angel deals in the $500K range; Drew Turitz who put money into Fee Fighters among about six other deals; Dan Ratner who has invested in far more firms than just SitterCity, Les Teichner, and many others.

But are we really in an era now where, as Lon Chow told me, “you can’t have too many deals funding start-ups”?

How many of those coastal investors that Kevin Willer told me are calling him to find out what’s hot in Chicago have actually written checks?

And when it comes to “incubator” or accelerator space do we really need 400k sf downtown versus the 100k sf we currently have, as Fred Hoch recently told me — and if you want to know why Fred and I were talking, I will just echo what Tom Churchwell says to me : “It’s none of your bees’ wax right now. Ask me no questions, I’ll tell you no lies.” You’ll know more in due time.

So while the Tech Center with 50k sf is nice as Fred says, does it do the trick? And will there now be a struggle between Tech Nexus which has grown and has been home to many small firms including Clean Energy Trust and the new Tech Center. Recall that there was competition between The Syncubator and Tech Nexus for holding events. I will be watching what people like Mark Lawrence do. Mark’s business partner Jeremy Smith has ties to the CEC, so through the Willer connection, will they migrate to the new Tech Center?

In other words, when it comes to early stage and seed investing as well as accelerator type space, are we just getting started or is the appearance of a flurry of activity illusory?

In that regard, Hyde Park Angels has had one exit so far, i2A has had one exit so far out of 13 deals done,Wildcat Angels has done five deals with no exits yet, and god only knows Bob Geras needs an exit badly or Dawn will have him sleeping on the couch. Heck, she already bought a pad lock for the fridge.

So, big pic question: Is all the happy horse manure that Matt McCall was dishing out to us on December 14th at the CEC Start-up predictions seminar true, namely that we have three or four years left in the current 15 year tech cycle (see www.vcconfidential.com and Ray Kurzweil)? McCall says there have been 40 or more exits in the last few years here.

But Matt, if Chicago is the current cat’s pajamas, why did New World put $20MM into Facebook rather than local firms? How did that investment help Chicago?

Matt, when FeedBurner was one of your investments, you showed up at every Tech Cocktail to tout them and now you and Howard Tullman can’t say enough about the inexorable lurch toward world domination by Facebook which will consume and subsume everything.

As of last week, Google+ is making big headway against Facebook and a report I heard recently has Twitter outdoing Facebook in media stories.

BTW, McCall is clearly channeling Steve Jobs with his nascent beard and his black turtleneck sweater.

But at the end of the day, Matt was so anxious to cheerlead that he made the audience repeat some chant about how excited we are, but in his zest for cheerleading and evangelizing for the greatness of the future of Chicago high tech, he buried his true lead: Venturegeddon.

Yes, folks, big dollar VC investing is on the wane and as Matt noted, the august CALPERS fund has dropped its venture investing from 7% to 1%. Matt also pointed out that 13 firms did a deal in 2011 in Chicago. But he predicted that the number of VC firms which will do a deal in 2012 will be down to seven or eight.

To some degree, angel groups are picking up the slack, but we are not discussing the bigger problem: dead man walking.

Wally Cornett knows it well. After that first round of what we usually call Series A funding entrepreneurs still need follow-on funding and Series B funding and as Wally often said, the trapeze bar would just not swing far enough. Companies got caught in the squeeze or the crunch between funding stages.

In plain English, it is great to get a first round but how about seconds?

For many years, the greatest weakness in Chicago tech was getting even that first round of seed funding from angels. Clearly, the angel scene has improved. Rather than just being the crowd that invested in Dynasty Technology with Mike Lyons in late 1992, the first real deal I cut my teeth on, we now have a much broader and deeper swath of angel investors some of whom like Jeff Carter come from the trading industry. David Weinstein was right about that. He predicted that traders would provide a rich source for investing in start-ups. If we had about 40 people in 1992 who did at least one angel deal a year, today we probably have about 200.

I have not done a formal count, but that is including people we don’t hear about regularly like Ken Wruk, Bob Okabe, Ron Reimann, and people I don’t even know like the guy who lead the angel group that invested in ISIS Power.

There are dozens of these small groups that may do one or two deals a year.

The way I see it, Lightbank is essentially doing angel funding in these first rounds which are generally in the $1MM range. But it is structured and they call it Series A.

They differ from angel groups like Hyde Park Angels in two key respects. First, Eric and Brad make no secret of the fact that they want not only to invest, but they want control — and they tend to micro-manage which is just the way Groupon is run.

Second, they have their own incubator of sorts at 600 W. Chicago which houses 11 firms. I find it significant that they are not telling the firms they’ve funded to move into the new Tech Center. They want to run their own show.

The way I read it, Eric and Brad have a methodology not just for investing but for growing the firms. Their template is doing at the Series A level what venture accelerators like Excelerate, YCombinator, Tech Stars and other groups are doing at the pre-funding stage. BTW, what has become of Sean Corbett and Scalewell?

Let me get back to the dead man walking problem.

Entrepreneurs still have to get to the next stage.

Will Brad and Eric be as quick to fund Series B in the $3MM to $5MM level as they have been to fund firms at the $1MM level? Time will tell and 2012 will be key. I agree with Kevin Willer who told me in August 2011 that if we’re talking about Groupon a year from now (which would be August 2012) “we haven’t done our job.” Everyone has a different time frame in mind for the true take off of Chicago high tech. Fred Hoch, for example, thinks three to five years.

We have plenty of early stage start-ups. More amore mentoring. More and more angel and early stage investing. More and more space.

And what about all those deals HPA has done? Or i2A?

Where will they go for the next round?

You see the problem?

41. Let me call this section: Fairness, a level playing field, and conflicts of interest. Skip this. I have a lot to write here about Excelerator, Henikoff, Willer at both the CEC and NWV, Lon Chow’s and Matt McCall’s view on the issues, Mark Lawrences’s view and all sorts of things pertaining to whether everyone gets an even shot at the allocation of resources (money and mentoring) and this gets into everything from issues with judging contests, admission to programs like venture accelerators, deals done by places like the i2A, etc.

It’s a long section and I’ll have it for you soon.

42. What is really going on between Scott Upp and his son and the lawsuit? Scott is accusing his son of walking off with key customer information to set up his own shop?

Did Scott really throw a beer bottle at his son or at one of the employees?

But more to the point, why is this happening?

Father/son relationships always intrigue me.

Full disclosure: I worked for Scott Upp as an IT recruiter from April 15, 1982 until the summer of 1984 and Scott and his wife Debbie and I have been in touch over the years. In fact, I spent the night at their house in Hinsdale (?) when I made the trek out there for Bob Bernard’s funeral and I have a lovely winter coat from Scott.

Scott and Debbie are predictably not happy with me for reporting on them, but this is an interesting story.

43. What is the real story on Dan Malven at Analyte Media, funded in part by Matt McCall and Lon Chow?

Why was Dan demoted?

And what is the Dan Malven / Chuck Dorfman story?

44. Whatever happened to Bill Lederer’s $9MM house that was being foreclosed on? And on that subject, what happened to Socrates? Haven’t you heard, he ate hemlock.

Hey, Bill Lederer is a comical character always good fodder for this report.

What was the amount of the settlement between Bill and Chris Sorensen from art.com?

And one persistent source of confusion is what went on at netgov.com.

45. What really went on at divine with Brenda Lee Johnson and other hot women inside and outside divine like Emily Shagley?

46. Did John Noel and Kathy Liu write all those emails to TMR during the ITDA / ITA period after Rachel Rusch tipped me off in July 2009 about the shenanigans — and the heavy drinking!

If they did not write them, who did?

Weinstein, Thornton, who?

And on that topic, who wrote the Harlan Jones letters to TMR? Stephen Meade? Bob Gerometta? Lundin?

Also, who was behind the hate mail I got after the fiasco of the infamous Blue Meteor party?

tinyurl.com/6v4mcm3

47. What was the real story at Michigan & Oak which had four partners: Mohan Sawnhey, Steve Kaplan, Russ Rosensweig and Rick Salvadore?

Sawnhey was bounced out in an ugly internal battle — or so I heard. There was a gag order putting the kibash on talking about the whole thing and the law firm Winston & Strawn was involved.

Russ Rosensweig ran The Roundtable Group and Rick Salvadore worked for Lederer at art.com, then ran Morgan Works and a few other firms.

Steve Kaplan is a complicated story. Back in the days of Michigan & Oak, Sawnhey was painted as the rapacious Kellogg professor who was collecting hundreds of thousands of dollars for brokering funding deals with divine interVentures. Steve Kaplan was viewed as clean and as not having conflicts.

But in the last few years, professor Kaplan (at Chicago Booth) has been closely tied to Eric Lefkofsky and Brad Keywell.

Does he own stock in Groupon?

Back to Michigan-Oak.

I wrote this:

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Rick met Mohan Sawhney from Kellogg about three years ago, struck up a friendship and is a partner in the firm Michigan-Oak Partners along with Mohan and Professor Steve Kaplan from the University of Chicago Graduate School of Business. Another partner in the firm, Russ Rosensweig, who runs the Roundtable Group, Inc., which puts on seminars about E-commerce, left recently to focus on the Roundtable exclusively.

Michigan-Oak has advised three firms in exchange for equity: fob.com, capacityweb.com, and bigedge.com (now mvp.com). Here is a list of the firms they have been associated with from their site (www.michigan-oak.com):

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48. What was the role of Kris Hammond in hiring Al Wasserberger at Intellext (which changed its name to Meda River)? BTW, where is Al’s ex-wife Joy these days?

49. I have many more questions, but let me let you chew on this for now. The next report is ready go but needs the Table of Contents. I expect three more reports today.

BTW, my new buddy at dialysis, playwright Alan Gross (Lunching, High Holidays) will be remembered for his five word contribution to Western civilization: Don’t get mad, get Glad.

He developed that line as an advertising guy at Leo Burnett.

He wrote an article about East Bank Club for Chicago Magazine entitled ZBT Forever which Chicago Magazine refused to print because it was too nasty.

No surprise there. After the success of Lunching Alan was being compared to Neil Simon. That became a heavy burden, he told me.

We talked for more than two hours on Saturday, so I have much more. One of Alan’s good friends is the actor Peter Riegert (who played in Animal House). BTW, is Katsantonis still alive?

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END OF REPORT