URL: http://www.nytimes.com SUBJECT

1057 of 1258 DOCUMENTS

The New York Times
March 7, 2007 Wednesday

Late Edition - Final

For Internet Barons, Uncharted Investment Territory
BYLINE: By MATT RICHTEL
SECTION: Section H; Column 1; The Business of Green; NEW CONQUESTS; Pg. 6
LENGTH: 1430 words
ROBERT M. METCALFE, Silicon Valley legend, creator of the Ethernet standard, founder of 3Com and now a venture capitalist, makes a bold prediction about technology investors' next conquest.

''We're going to solve the energy problem in 30 years, just like we solved the Internet problem in 30 years,'' he said.

For that to happen, many hurdles must be overcome, including, for Mr. Metcalfe, a personal one. Until recently, he didn't know much about the field or its markets. He said he was still struggling to figure it out.

There lies a conundrum for the Internet barons who have turned, of late anden masse, to investing in solar, wind, biofuel and other energy startups. Does their expertise with technology qualify them to take on the world of alternative fuel and power?

When it comes to Energy 2.0, are some of the nation's most successful investors in over their heads?

Mr. Metcalfe, 60, and other venture capitalists say they are getting up to speed on the subject by meeting with academics and experts, hearing pitches from entrepreneurs seeking financing, partnering with energy investors and applying the same methodology that created giants like Amazon and Yahoo to take on the oil juggernaut.

The key to success, they say, is the Silicon Valley investment vetting process. The venture capital model, they contend, pits great entrepreneurs against one another, invests in the best technologies and creates focused, streamlined companies and new industries.

But their certainty, which can spill into bravado, has stirred criticism even within their own ranks.

''They're completely wandering in with no clear idea'' of how the energy industry works, said Paul Kedrosky, a venture capitalist and the executive director of the von Liebig Center for Entrepreneurism and Technology Advancement at the University of California at San Diego.

He argued that the party line -- that good investment strategists can apply their principles across industries -- did not acknowledge the peculiarities and complexities of energy technology.

''The downside? They're going to blow up this sector before it has a chance to get established,'' Mr. Kedrosky said. But, he added, ''You won't find out that today's investments were nonsense for at least 24 and maybe 36 months.''

There are many investments; one of the hottest in the business world has been the rush of interest into alternative energy by venture capitalists. In 2006, they put at least $727 million into 39 alternative-energy startups, compared with $195 million in 18 such firms in 2005, according to the National Venture Capital Association.

The investment reflects not just the changing political and public policy sentiment toward energy but changing dynamics within the venture capital business. Because it has gotten harder to take technology companies public and reap big paydays, investors are directing their discipline and seed capital to new industries.

None are potentially bigger than energy's $1 trillion annual market. Plus, energy has the benefit of creating potentially environmentally friendly technologies. The mantra in the venture capital world has become, ''Do well by doing good.''

Some venture capitalists argue that the shift from the information and biotech industries to energy startups is not that big. Take Samir Kaul, who made the change from sequencing DNA to building companies that make car fuel from wood chips.

A biochemist by training, Mr. Kaul, now 33, was working at the Institute for Genomic Research in 2000, where he oversaw a pioneering project that sequenced the genome of Arabidopsis thaliana, a member of the mustard family and an important organism in biological research. He went to Harvard Business School, then worked as a venture capitalist in Boston financing and creating companies that focused on DNA sequencing and synthetic biology, which involves programming biological cells.

In early 2006, he joined Khosla Ventures, a Silicon Valley venture firm started by Vinod Khosla, a founder of Sun Microsystems. The firm's concept was to emphasize the emerging world of alternative energy, and Mr. Kaul said the fit was more natural than it appeared.

''A lot of the basic principles of understanding the genetic blueprint are very, very relevant in the clean fuels and the clean tech area,'' he said.

For example, he said that sequencing and engineering processes that might yield a cell better equipped to fight disease could also yield an organism that creates ethanol from plant refuse more efficiently.

Generally, Mr. Kaul argues that venture capitalists steeped in other technologies are finding that their expertise applies to energy. For instance, he noted, investors in material sciences might be equipped to invest in clean-water startups.

Nicholas Parker, the chairman of the Cleantech Group, an energy-investing trade and research organization, agrees. ''Silicon is used to make semiconductors, and it is used to make solar cells,'' he said. To be successful in energy, venture capitalists ''need to come at it from their existing strengths.''

Still, Mr. Parker said that some investors appeared to be jumping in hastily or without doing the proper diligence.

''It's very hip to be saying you're doing this stuff,'' he said. Of the more than 1,000 venture capitalists getting involved, he added, there are ''well over 100 V.C.'s that are for the first time indicating an interest but that don't yet have a lot of depth in their teams'' on alternative energy.

Technical expertise is only part of the challenge for venture capitalists making the transition to energy, said Charles J. McDermott, a general partner with RockPort Capital Partners in Boston. Mr. McDermott, who has spent about 25 years involved with energy companies, said there were peculiarities to nurturing them.

For instance, ''If you've never tried to sell technology to a utility, you will definitely experience a learning curve,'' Mr. McDermott said, adding that some customers of energy were regulated monopolies that did not necessarily play by the same profit-and-loss rules as free-market competitors.

One way in which traditional venture firms are learning about energy is by investing as partners with RockPort and other more experienced firms.

RockPort has already entered into deals with some major venture firms. One is an investment with Kleiner Perkins Caufield & Byers in Lilliputian Systems, a Wilmington, Mass., company that makes tiny fuel cells for portable electronic devices. Mr. McDermott said that Kleiner was lending expertise on how to manage and build a startup.

''Nobody knows better than Kleiner how to groom a company,'' Mr. McDermott said.

Mr. McDermott said he was generally optimistic about venture capitalists' chances for success in energy investing.

Yet his own optimism is belied by RockPort's investments. The firm has not put any money into biofuel companies partly because, Mr. McDermott said, it fears that many will fail unless they get government subsidies. Meanwhile, more than a third of new alternative energy financing from venture capitalists in 2006 went to such startups, according to the National Venture Capital Association.

The lure of the payoff from investing in energy is too great to ignore for Mr. Metcalfe, who in 1973 invented the Ethernet standard for connecting computers, and in 1979 founded 3Com, which makes computer networking equipment.

Six years ago, he became a venture capitalist at Polaris Venture Partners, focusing on information-technology startups. Last year, he said he became convinced that energy investments were worthwhile. ''You'd have to be an idiot not to notice the huge opportunity in energy,'' he said. ''The markets are huge.''

Last April, in one of its first such investments, Polaris put $6.8 million into GreenFuel Technologies Corporation. The company develops algae bioreactor systems that capture carbon dioxide from smokestack emissions, producing more algae that can be converted into biofuels.

Mr. Metcalfe says he spends a lot of time learning about new energy technologies. One day he might hear about wind power, the next about refining of metallurgical silicon for use in solar cells. ''I'm really on the steep part of the learning curve,'' he said, adding, ''There's no proof yet I'm good at it.''

But he said he felt the challenge was worthwhile. And it's what he is paid to do.

''My job is to create innovative high-tech companies and get venture returns,'' he said. ''In the energy market, there's a huge need, and lots of technology to fill that need.''

URL: http://www.nytimes.com
SUBJECT: VENTURE CAPITAL (92%); ENTREPRENEURSHIP (90%); INTERNET & WWW (90%); INITIAL PUBLIC OFFERINGS (89%); RENEWABLE ENERGY (89%); COMPUTER NETWORKS (78%); WIND ENERGY (77%); NETWORK PROTOCOLS (73%); ELECTRIC POWER INDUSTRY (70%); BIOFUELS (69%); PUBLIC POLICY (68%); US POLITICAL PARTIES (67%); ELECTRIC POWER PLANTS (89%) Electric Light and Power; Venture Capital ; Special Sections; Electric Light and Power
COMPANY: 3COM CORP (90%)
TICKER: TCC (FRA) (90%); COMS (NASDAQ) (90%)
INDUSTRY: NAICS541512 COMPUTER SYSTEMS DESIGN SERVICES (90%); NAICS334119 OTHER COMPUTER PERIPHERAL EQUIPMENT MANUFACTURING (90%); SIC7373 COMPUTER INTEGRATED SYSTEMS DESIGN (90%); SIC3577 COMPUTER PERIPHERAL EQUIPMENT, NEC (90%)
PERSON: MICHAEL MCMAHON (94%) Robert M Metcalfe; Matt Richtel
GEOGRAPHIC: SAN DIEGO, CA, USA (77%) CALIFORNIA, USA (91%) UNITED STATES (91%)
LOAD-DATE: March 7, 2007
LANGUAGE: ENGLISH
GRAPHIC: Photos: EXPERT -- Samir Kaul left biotech to support firms creating renewable energy. (Photo by Fred Mertz for The New York Times)

STEEP CURVE AHEAD -- Robert M. Metcalfe, the Silicon Valley legend, holds a beaker of dried algae. He is now a venture capitalist specializing in the energy industry, where he sees great opportunities. (Photo by C. J. Gunther for The New York Times)

PUBLICATION-TYPE: Newspaper

Copyright 2007 The New York Times Company

1058 of 1258 DOCUMENTS

The New York Times
March 6, 2007 Tuesday

Late Edition - Final

Big Corporate Gift Expected For Los Angeles Museum
BYLINE: By EDWARD WYATT
SECTION: Section E; Column 3; The Arts/Cultural Desk; Pg. 2
LENGTH: 444 words
DATELINE: LOS ANGELES, March 5
The Los Angeles County Museum of Art is expected to announce a corporate gift of more than $10 million on Tuesday that it will use to finance a building project, a person close to the museum said yesterday.

The gift, for new exhibition space, arrives as the museum pursues a sweeping renovation of its 20-acre campus, and its director, Michael Govan, aggressively seeks to step up fund-raising and transform the museum's somewhat dowdy image.

The museum, on Wilshire Boulevard in Hancock Park, next to La Brea Tar Pits, has been working since 2004 with the Italian architect Renzo Piano on the renovation plan.

The first phase includes the construction of the Broad Contemporary Art Museum, which is already under way and is being paid for by a $60 million gift from the philanthropist Eli Broad. That building, along with a new grand entrance pavilion and an underground parking garage, is expected to open in about a year.

Allison Agsten, a spokeswoman for the museum, declined to comment on any potential announcement. But the person close to the museum, who declined to be identified because the institution had not authorized disclosure of the gift, said the donation was expected to be in the tens of millions of dollars. That the gift is from a corporation is likely to stir some excitement in the art world, given recent cutbacks in companies' contributions to nonprofit institutions.

As part of his attempt to raise the museum's profile Mr. Govan has helped recruit several new members of its board, including some business figures. Among those named to the board in recent months are Terry Semel, the chief executive of Yahoo; David Bohnett, a technology entrepreneur and venture capitalist; Chris DeWolfe, the co-founder and chief executive of MySpace.com; and Anthony N. Pritzker, a co-founder of the Pritzker Group, an investment firm, and part of the family that founded the Hyatt hotel chain.

The museum has been trying to raise money to finance the second and third phases of its rebuilding plan, which are to include a renovation of a building that formerly housed the May Company department store on the western edge of the museum campus. That building will include exhibition space and a children's gallery, a restaurant, bookstore and administrative offices.

In an interview last week Mr. Govan said the later phases of the project would include ''a new exhibition facility'' on the west side of the campus, near the May Company building.

Last month he described plans for a giant moving sculpture at the museum's new entrance: a 161-foot-tall sculpture by Jeff Koons that is essentially a working 1940s locomotive suspended from a crane.
URL: http://www.nytimes.com
SUBJECT: CONSTRUCTION (90%); BUILDING RENOVATION (90%); ART & ARTISTS (90%); MUSEUMS & GALLERIES (90%); CORPORATE GIVING (90%); EXHIBITIONS (89%); BOARD CHANGES (89%); SCULPTURE (89%); FUNDRAISING (89%); CHARITIES (78%); MAJOR GIFTS (78%); INTERVIEWS (76%); VENTURE CAPITAL (76%); HOTELS & MOTELS (75%); ENTREPRENEURSHIP (74%); NONPROFIT ORGANIZATIONS (71%); HOTEL CHAINS (62%); RESTAURANTS (62%); BOOKSTORES (62%); RETAILERS (62%); FOUNDATIONS (78%); PHILANTHROPY (78%); INTERNET SOCIAL NETWORKING (64%) Art; Grants (Corporate and Foundation)
COMPANY: MYSPACE.COM (81%)
ORGANIZATION: Los Angeles County Museum of Art
PERSON: ELI BROAD (56%); TERRY SEMEL (54%) Edward Wyatt; Michael Govan
GEOGRAPHIC: LOS ANGELES, CA, USA (93%) CALIFORNIA, USA (93%) UNITED STATES (93%)
LOAD-DATE: March 6, 2007
LANGUAGE: ENGLISH
PUBLICATION-TYPE: Newspaper

Copyright 2007 The New York Times Company

1059 of 1258 DOCUMENTS

The New York Times
March 6, 2007 Tuesday

Late Edition - Final

Start-Up Insurer in Florida Pursues an Exclusive Niche
BYLINE: By JOSEPH B. TREASTER
SECTION: Section C; Column 3; Business/Financial Desk; Pg. 3
LENGTH: 1183 words
Most insurance executives look at the lavish houses and condominiums along the Florida coasts and cannot help thinking: hurricanes, wreckage, financial ruin.

But Ross J. Buchmueller sees opportunity. As most big insurers are cutting back coverage in Florida and other coastal states after a string of catastrophic hurricanes, Mr. Buchmueller has started a company offering policies that hardly anyone else wants to sell -- and at as little as half the going rates.

His strategy, he says, is not as daring as it seems. By studying industry statistics, he has found that big, expensive houses have fared the best in hurricanes. And his company will sell only to owners of those homes.

To be covered, a home must be worth more than $1 million. It must be fairly new, solidly built and equipped with the strongest shutters, or such high-grade windows that flying debris merely bounces off them.

Mr. Buchmueller said that to further reduce his risk, sales in the first year will be limited to a few thousand policies and he will buy insurance from big international insurance companies, known as reinsurers, that will cover 75 percent of his potential losses.

The cost of the reinsurance will sharply lower his profit. But Mr. Buchmueller, 41, has set up his company, Privilege Underwriters Reciprocal Exchange, as a nonprofit concern, owned by its policyholders. His reward, Mr. Buchmueller says, will come from a management fee, which should rise as the company grows and expands into a national business.

Mr. Buchmueller has been quietly selling policies for several weeks and plans to announce the opening of his new company formally today.

Some insurance experts say the venture may inspire other entrepreneurs -- or groups of property owners, like condominium associations -- to create similar arrangements. Doing so could help break the crippling pattern in which big, established insurers reduce coverage, and investors in new companies chase ever-higher premium prices.

But others are skeptical. ''It's a creative approach,'' said Michael Koziol, a public policy specialist at the Property Casualty Insurers Association of America, a large insurance trade group, ''but like any new company, there's a certain risk. More new companies go under than old companies.''

Robert P. Hartwig, the president and chief economist at the Insurance Information Institute, a trade group in New York, said that even with insurance premium prices at a record high in Florida, they were still not high enough to offset all the potential damage that many weather analysts expect over the next decade or so.

Mr. Buchmueller says his company will have considerably more capital than most Florida start-ups -- an estimated $45 million by the end of the year. And he says that he is confident that he has found a gap in the market where the going prices are higher than the actual risk. ''Everyone in Florida thinks they're paying too much for insurance,'' he said, ''and some of them are right.''

Florida has been hit by a number of hurricanes in the last few years. Insurers have paid billions of dollars in claims, and the price of coverage for homes in the state is the highest in the nation. Some people are paying almost as much for insurance as for mortgage payments. And every week, 15,000 homeowners in Florida are requesting bare-bones coverage from the state-run insurance agency because no one else will sell it to them -- at any price.

In January, Florida's Legislature went into special session to deal with the insurance crisis and decided to force down prices for all companies, including Mr. Buchmueller's, by perhaps 20 percent.

But many insurance experts say that if hurricane damage is heavy in the next few years, the state will probably have to make up for the price cut and possibly a lot more in claims costs by issuing bonds and passing on potentially enormous expenses to all policyholders.

Florida regulators welcomed Mr. Buchmueller's company as a new source of coverage. They approved his plan in mid-January, and he has started selling policies through independent agents across the state. Mr. Buchmueller previously spent about 20 years working for the Chubb Corporation and the American International Group.

Charles Kilvert, the owner of the Claude D. Reese insurance agency in Palm Beach, said the first question he hears is: ''Are these guys going to pay their claims?''

''I tell them, 'These guys are top-flight industry insiders,' '' he said. ''And they're very conservative. Whereas the state allows an insurance company to take in $10 of premium for every dollar it's got for paying claims, these guys are coming in at less than one to one.''

One of Mr. Buchmueller's first customers, Ellis Kern, owns a two-story pale yellow Mediterranean-style home on a golf course several miles inland from West Palm Beach. Mr. Kern, a manufacturing executive, said he had been paying $15,175.86 a year for $1.2 million in coverage from a unit of Lloyd's of London. He is now paying $6,845 to Mr. Buchmueller's company for $1.7 million in coverage.

''Obviously,'' he said, ''the first thing was that there was a savings.''

But Mr. Kern said he was also drawn to the company by its business plan. ''They were limiting their risk, being selective in who they were taking,'' he said.

Patrick Lacy, a manager at the Plastridge Insurance Agency in Delray Beach, said he had been talking to a homeowner who had been paying $32,637 for $2.8 million in coverage. From the new company, Mr. Lacy said, the same coverage would cost $18,812.

Customers of the new company are required to make an additional one-time payment equal to half their first-year premium into a fund for paying claims. Even then, costs are often lower than before. At the end of each year, Mr. Buchmueller said, any company money left over from claims and other expenses is to go into holding accounts for the policyholders, from which they can collect if they decide to drop their coverage.

In the meantime, putting money that would otherwise be termed profit into special accounts will add to the company's ability to pay claims and also provide tax benefits.

The structure Mr. Buchmueller chose has been used by groups of professionals -- doctors, lawyers and architects -- and some industries, including pharmaceutical manufacturers, when coverage they need has become scarce and extremely high priced. One of the biggest, most successful insurance companies in the country, USAA, is organized along the same lines. But recent start-ups have been structured to yield high profits as quickly as possible.

One quirk of Mr. Buchmueller's company is that his rates, as approved by regulators, are about the same or higher than those of other insurers catering to the rich, like Chubb. A big difference is that the others routinely refuse to sell new coverage. And the few companies willing to provide the coverage can charge much higher rates.

''It's like going to the butcher,'' Mr. Buchmueller said, ''and he tells you that rib-eye sells for $1 a pound. But you go to buy it, and you can't have it.''

URL: http://www.nytimes.com
SUBJECT: INSURANCE (93%); RESIDENTIAL CO-OWNERSHIP (90%); HURRICANES (90%); REINSURANCE (90%); TROPICAL STORMS (90%); WEATHER (90%); CONDOMINIUMS (89%); ENTREPRENEURSHIP (89%); INSURANCE ASSOCIATIONS (89%); RESIDENTIAL CONDOMINIUMS (89%); STARTUPS (86%); HOMEOWNERS ASSOCIATIONS (78%); PROPERTY & CASUALTY INSURANCE (78%); INSURANCE POLICIES (78%); INSURANCE PREMIUMS (78%); NATURAL DISASTERS (73%); COASTAL AREAS (72%); STATISTICS (71%); PUBLIC POLICY (71%); INDUSTRY ANALYSTS (69%) Hurricanes and Tropical Storms; Insurance; Hurricanes and Tropical Storms
ORGANIZATION: Privilege Underwriters Reciprocal Exchange
PERSON: MICHAEL MCMAHON (50%) Joseph B Treaster; Ross J Buchmueller
GEOGRAPHIC: FLORIDA, USA (98%); NEW YORK, USA (79%) UNITED STATES (98%) Florida

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