The former editor and his reporter at TechCrunch, a leading AOL tech news site, are accused of being part of a trend among Silicon Valley journalists to raise money from investors in exchange for favorable PR services.

Here is the formula:

First you establish yourself as an “influencer” by posting a lot of noisy stuff on a blog and building an audience. Then you need to “monetize” your influence. You tell all the VCs in the Valley that you are starting an “angel fund,” and you ask each one to give you, say, $500,000.

They go along because

(a) $500,000 is pocket change to these guys — so small, in fact, that they don’t care if they lose every penny of it; and

(b) you’re an influential hack and they don’t want to piss you off; and

(c) they figure you can maybe write nice things about their portfolio companies, which would be especially useful if/when one of their portfolio companies gets caught up in some scandal; and

(d) if any independent journalists write something critical about one of the VC’s portfolio companies, you can use your influential personal blog to savagely attack those journalists and try to discredit them.

This is exactly what happened recently when Path, a startup in which CrunchFund is an investor, was criticized by Nick Bilton, a reporter for the New York Times, about Path’s secret spying on users’ address books. Mike Arrington launched a “blistering critique” of Mr Bilton, calling him a pit bull.

Almost before you could stop throwing up in your mouth at the idea of Michael Arrington accusing a Times journalist of being less than noble, Arrington’s partner at CrunchFund, MG Siegler, weighed in with his own attack…

I’ll give them this much. They’re good at what they do. Siegler especially is a nasty little ankle-biter who has developed some level of expertise in launching ad hominem attacks. He did one on me a while back. Then he did one on Josh Topolsky at The Verge.

Ouch.

He takes on another Techcrunch alumnus, Sarah Lacy and her new site PandoDaily, saying that she is working the same type of angle as CrunchFund, taking investments in exchange for friendly coverage.

He doesn’t call it blackmail, but Mr Lyons quotes an unnamed VC, who tells him that some tech blogs have business models that seem to be based on “hush money.”

Mr Lyons is right to point out the bias in the posts by Mr Arrington and Mr Siegler, but he unfairly tars all local media when he writes:

This is what now passes for “journalism” in Silicon Valley: hired guns and reformed click-whores who have found a way to grab some of the loot for themselves. This is perhaps not surprising. Silicon Valley once was home to scientists and engineers…

Now it is being turned into a silicon cesspool, an upside-down world filled with spammers, liars, flippers, privacy invaders, information stealers — and their grubby cadre of paid apologists and pygmy hangers-on.

Hit men, click whores, and paid apologists: Welcome to the Silicon Cesspool » Real Dan Lyons Web Site

There’s plenty of good journalism in Silicon Valley. Mr Lyons is not from around here and is clearly looking in exactly the wrong places but most people know where to go and who to read.

Mr Lyons should also take a look at New York City’s tech media scene. VCs might be looking for favorable coverage there too.

Business Insider, edited and founded by Henry Blodget, a former high flying Wall Street analyst, raised $7 million in September 2011. This followed the publication’s first profitable year — making $2k on revenues of about $5 million.

Leena Rao reported:

The round was led by new investor IVP, writes the site’s co-founder and CEO Henry Blodget. The company had previously raised funding from RRE Ventures, Allen & Co., Marc Andreessen, Gordon Crovitz, Ken Lerer, and others. This latest round bring Business Insider’s total funding to nearly $14 million.

We know how much VCs love low margin businesses — so what else are they looking for?

Damien Van Achter imagines what a fair trade Apple laptop might look like.

Nick Wingfield and Charles Duhigg reported in today’s New York Times’ Bits blog:

Apple said Monday that it had asked an outside organization to conduct special audits of working conditions inside Chinese factories where iPhones, iPads and other Apple products are manufactured. And in a significant about-face for the company that has the potential to affect the electronics industry, Apple asked the organization to identify particular facilities where abuses are discovered.

Apple said the group, the Fair Labor Association, started its first inspections Monday at a factory in Shenzhen, China, known as Foxconn City, one of the largest plants in China, with more than 230,000 workers.

Apple Asks Outside Group to Inspect Factories - NYTimes.com

The fact that Tim Cook, CEO, agreed to reveal the identity of Apple’s supply chain is a huge move for a company with such an intense culture of secrecy.

It’s also a reaction to critics. Apple has become a focus for people protesting harsh working conditions in the electronics industry. It’s a good target because it has large brand identity and the criticism is hitting home.

In an email to employees earlier this year, Mr Cook addressed accusations about Apple’s ambivalent indifference to working conditions at suppliers, saying:

“Any suggestion that we don’t care is patently false and offensive to us.”

He gave his word that, “What we will not do - and never have done - is stand still or turn a blind eye to problems in our supply chain.”

Clearly, there is a strong emotional issue in how Apple sees itself and that is now motivating Mr Cook to show that Apple is aware of its social responsibilities -– an aspect of the company that was rarely stated under Steve Jobs.

Apple has set in motion a process that will enable it to become the first “Fair Trade electronics” company — the first electronics company able to show that its products are made according to accepted principles of fair use of labor, in conditions of safety, and fair salary. And certified by an independent organization — not by its own audit.

There’s a powerful message here and a natural progression for Apple.

- “Think Fair” would provide an additional cache for Apple products that would easily justify their higher prices.

- “Think Fair” would sell a lot of Apple gear and it’s a considerable barrier to competitors.

Apple has high margins in the 40% plus range, so it can easily absorb a couple of points or more in higher supply chain costs. But if you are Dell, or Hewlett-Packard, or Amazon your operating margins are already in the single digits, so it’s not going to be easy to follow Apple.

I advocated for Apple to become the first “Fair Trade Electronics” company back in May, 2010. I also did a couple of radio interviews on the subject. It seemed inevitable.

My argument was simple: After all the publicity about suicides and deaths at Apple suppliers, “Think Fair” is the better kind of killer marketing.

The downside is that Apple fanbois would become even more annoying — flaunting with even greater vigor, their Fair Trade iPhones, iPads, and MacBook Airs. Self-rightousness is a horrible accessory.

Gopi Kallayil, head of Google Plus

I usually try to keep my weekends relatively geek-free but I do make exceptions for some events, such as those produced by local TEDx organizations.

Many people are fans of the annual TED conference and its rosters of amazing speakers. But few can afford the price of attendance. Fortuantely, there are now hundreds of local TED events in dozens of countries, and likely, some are near you. The local events are designated with an ‘x’ and are well produced and give you a flavor of big TED at a fraction of the cost.

Here is my report and photos on the recent TEDxBerkeley event, which had the theme:” Inspiring Innovation.”

I know the people that organize TEDxSF pretty well but this was my first time at TEDxBerkeley, which was held in the Zellerbach auditorium on the University of California campus.

The audience was very young compared with the much older audience for TEDxSF. The two events could maybe trade some attendees, it’s always great to see young students.

While I waited for the event to begin I chatted with Carlos Olguin (above right), head of the Nanotechnology Group at Autodesk. I heard about Autodesk’s plans for design software for life itself. He and one of the researchers at UC Berkeley showed me some petri dishes with genetically modified e.coli bacteria.

Here are some e.coli that have been genetically modified to smell like banana. I was asked if I’d like to smell it, I declined. These e. coli are a weakened strain that cannot survive for long outside of the lab, but I didn’t want to chance it affecting my own gut flora, which are genetically modified to smell like roses.

DeCadence kicked off the event with some great a cappella singing.

Carl Bass, CEO of Autodesk spoke about innovation. I loved what he said. He spoke about how corporations want to be innovative but that innovation is not their territory. Innovation is created by rule breakers and risk takers. The modern corporation is designed to impose rules and minimize risks. Well said.

Connie Duckworth was very impressive. She is a retired partner and MD of Goldman Sachs, where she was named the first woman sales and trading partner in the firm’s history. She spoke about her work as founder ofAzru Studio Hope, a non-profit focused on helping women in Afghanistan find work and earn money for their families.

Nipun Mehta, the founder of ServiceSpace, spoke about a concept he calls “Giftivism” which is a “Gift Economy.” He shared some stories about Indian villages. Interestingly, he did not mention the Burning Man community, which has been practicing a “Gift Economy” for more than 20 years.

Gopi Kallayil, head of Google Plus, the latest and sometimes controversial social network spoke about the lives that Google Plus has saved, or at least, saved an injured girl from paralysis because he was able to hook up surgeons with local doctors over the service.

Mr Kallayil is a prize winning Toastmaster, he gave a great performance but it was content-light.

Charles Holt spoke about being fired, rather as a friend described it, “released” from a job at IBM and finding his true calling as a singer.

Jodi Lomask and Capacitor kicked of the second session of the event.

David Ewing Duncan spoke about health and pollutants. He said that China’s coal-fired power stations send plumes of mercury laden pollution via the jet stream to California. His company is launching consumer test kits that will reveal mercury levels. He shared his own results from eating two meals of locally caught fish, which showed elevated levels.

Tapan Parikh, assistant professor at the School of Information Technology spoke about his trip to India and his adventures helping small villages.

Tiffany Shlain, founder of the Webby Awards, spoke about her film projects, which are crowd-sourced around subjects such as our interconnectedness. She showed a short film of people from around the world sharing their views.

Robert Strong began the third session of the day with a great demonstration of close up magic.

Maria Fadiman was very entertaining, sharing stories of her work as an ethnobotanist. I wish, when I was growing up, such profession existed because it sounds like fascinating research.

Dr. Neha Sangwan could barely keep her emotions in check as she shared her stories of her encounters with people such as the King of Bahrain and the wise advice she has given them. Most of her presentation consisted of her recounting story after story of people telling her how brilliant, young, and talented she is. She seemed in need of some reassurance about how brilliant, young, and talented she is.

Ken Goldberg talked about his life-long interest in robots and how robots can make us better at being humans.

Lindsey Stirling finished the show with an energetic display of violin playing while dancing at a whirlwind pace around the stage.

…

I like the local TEDx events but sometimes I wish that they were a little bit more unique and risk taking. I’ve always felt that the ‘x’ should stand for experimental — what else could you do in that 18 minute presentation window? Too often, little TED tries to ape big TED, and the presenters seem like they are auditioning for the main show in regional competitions.

I love the gaps between the talks, the chance to meet others. For example, during lunch I had a fascinating conversation with a research chemist working on developing artificial photosynthesis. It’s those experiences that count and make it worthwhile to attend, otherwise you can view it from home via a live stream for free.

Above, Kevin Gong, curator of TEDxBerkeley, and co-curators Renee Blodgett (right) and R. Jennifer Barr, were the lead organizers of the event.

The event was co-sponsored by Pearltrees, appbaker, and LiveStream.

If you’d like to explore more information about the event and the speakers you can browse this Pearltree:

- You will not use your personal profile for your own commercial gain (such as selling your status update to an advertiser).

- You will not send or otherwise post unauthorized commercial communications (such as spam) on Facebook.

Lots of people post about their company, promotional programs, or links to articles they’ve written. There is clearly a commercial gain in these profile updates. Anything related to your work, company products and services, etc, could be classified as spam.

This places many hundreds of thousands, if not millions of users in violation of this rule and subject to having their account terminated.

- If we disable your account, you will not create another one without our permission.

Also:

- You will keep your contact information accurate and up-to-date.

And you have no right to your name if it is similar to a trademark.

- If you select a username for your account we reserve the right to remove or reclaim it if we believe appropriate.

And:

- You will not tag users or send email invitations to non-users without their consent.

You have to get prior consent to send non-Facebook users an invite?

Clearly, many of these rules aren’t easily enforceable but they provide Facebook with plenty of potential reasons to disable virtually any account. For example, who hasn’t sent an invite to a non-Facebook user?

You can be in violation of the user agreement for not updating your cell phone number within two days:

- In the event you change or deactivate your mobile telephone number, you will update your account information on Facebook within 48 hours…

Be careful, you could lose important rights to your own content. If you place Facebook’s share button on any web page you give Facebook the rights to use that content on Facebook, even if no one actually shares your content! Facebook has the right to license that content to anyone it wants and to make money from it!

… you grant us a non-exclusive, transferable, sub-licensable, royalty-free, worldwide license to use any IP content that you post on or in connection with Facebook (”IP License”). This IP License ends when you delete your IP content or your account unless your content has been shared with others, and they have not deleted it

If you have created a Facebook application, watch out if it’s successful:

- We can create applications that offer similar features and services to, or otherwise compete with, your application.

The takeaway is: beware if you use Facebook for commercial purposes of any kind. You could lose important rights to your intellectual property and inadvertently assume new liabilities that leave you vulnerable to legal and financial claims.

I switched over to the official news release from Nicira: there was just one link in several pages prepared by its PR firm.

I’m not singling it out as an egregious example but as a typical one that is ubiquitous across many companies — it seems to be standard practice in PR materials to use the least possible number of hyperlinks.

Why?

I can understand the reason

if

newswire services charge extra to distribute documents with links, but that’s not true for publicity materials posted on a company web site. (The newswires tell me they don’t charge extra for links.)

PR people know about the “link economy” because they are always pleased to see my links to their blog posts or Tweets; and I see a lot of PR people linking to stuff on Twitter and Facebook all day long– yet those lessons don’t make it into their daily work.

Yet PR people constantly ask me how can they make their news releases more useful to journalists.
I smile and answer, “Put some links in it.” People usually laugh but I’m smiling less and less these days.

In this pervasive online world where we spend so much of our work time there should be no reason why news releases –these 100% digital electronic documents — have page after page with absolutely no links in them at all. It’s ridiculous, and it looks really bad when those PR materials are used to represent companies in the vanguard of Internet and networking technologies.

Why aren’t clients bothered by the absence of the hyperlink – this most basic and fundamental element of an Internet document – from the publicity materials prepared for them?

Clients are losing out massively because of this lack of links in their content. What do PR firms tell clients if they ask about the lack of hyperlinks?

Everyone knows that the foundation of Google’s search algorithm, PageRank pays close attention to links between trusted sites. If it’s done right, it results in a robust flow in organic traffic – the right kind of traffic because it is people that are interested in that company’s products. That’s good PR, right?

Companies shouldn’t go crazy and add tons of links because Google will think they are a spammer, but a few per page is reasonable, acceptable, and is even expected by Google’s spiderbots. After all, without links to other pages there wouldn’t be a Google, or a World Wide Web.

So why are company PR materials so link averse when their creators are so links-ago-go when it comes to promoting their own stuff?

I’ve been told that the problem is that PR firms aren’t paid to do search engine optimization (SEO), and so they don’t. Fair enough, but they could at least prepare SEO-friendly documents with links in them. They can leave the mechanics of SEO, the tracking and the counting, to others.

Embedding a few hyperlinks is trivial. And the bit of extra time it takes to find and test the links is a bonus when you have clients that pay by the hour. It should be a win-win for the PR firms and their clients you’d think. And reporters would save a few clicks too, making it a triple-win.

Yet it doesn’t happen. This has to be deliberate. But why aren’t clients creating a stink? Why are PR people deliberately shunning best practices for their clients yet are link-obsessed with their own content?

Put some links in it, it’s 2012, already.

And there’s lots of money being made, especially among the Super Angels, the incubators such as Y Combinator, the micro-VCs, and people such as Jeff Clavier, Dave McClure who have made fortunes selling startups to larger companies. Sometimes startup teams can go from seed to exit in under a year.

For the investors, making dozens of $10K to $25K seed investments, can be tremendously lucrative.

Just one $25 million payday from the sale of a startup will more than cover an Angel investor’s loss from a hundred dud $25K investments — which is a loss of just $2.5 million. The risk to reward ratios are off the charts, which is why so many want to be Angels.

And there’s no shortage of startups looking for seed investments. They are told that they must have a business plan, they must address market opportunities of at least $1 billion in revenues; industry sector expertise is important; do the team members have prior experience? Are there enough tech leads in the team?

We are repeatedly told that these, and many other factors, are important to investors.

But aren’t most of those “factors” BS? Take a look:

The plan is to sell these tiny businesses to larger companies in the shortest time possible.

But in the vast majority of cases, the buyers aren’t interested in the startup’s business, they are acquired for their engineering talent alone.

For example, this morning Seattle-based Geekwire announced an exclusive story:

Amazon buys TeachStreet

Amazon.com has acquired TeachStreet, the 5-year-old online marketplace that matches students and teachers.

It’s an interesting story, does this signal Amazon’s push into educational markets? Will it take TeachStreet’s technology and scale it across its massive cloud infrastructure?

Nope. Geekwire’s John Cook reports:

This is looking very much like a “talent acquisition.”

TeachStreet will be shut down on February 15th. Teachers who use the service will be able to export their class listings, and the company is offering a number of alternative services where teachers can market their classes.

This happens time and time again. Mark Zuckerberg has said it many times, Facebook acquires companies mostly for their talent. Google does it too, all the giants do. They buy the startups and close the business.

Twitter recently bought Summify (a few weeks after it was featured in SVW) and closed it down. Apple bought LaLa and closed it down. There are hundreds of startups acquired every year and their services or products are closed down.

This might seem like an expensive way to recruit engineers but there are many benefits such as removing potential competitors, which helps maintain the status quo. The giant companies have a lot invested in the status quo because they collectively have the most to lose from its disruption.

Plus, they have agreements not to poach staff from each other. So where else can go? Startups are by far the best hunting ground for new talent.

So, do we really have a startup boom? Or is it a masquerade, a proxy for a battle between the Internet giants for top quality engineers?

And is it really that expensive to recruit in this way?

A giant Internet company such as Amazon can leverage the output of a software engineer far more efficiently than a startup. The value of code is proportional to the scale of its use. The same code can be used to provide a service for one hundred people or ten million.

Building scale is hard, very hard. But if you already have scale, then you have the means to leverage the work of software engineers across a vast realm of business opportunities. So even if an Amazon or a Google pays out a couple of million dollars per engineer, it can monetize their productivity better than any startup because of the tremendous global scale of their platforms.

There are other benefits too: The acquisitions are usually made in stock, which is a far better reward for employees than using stock option grants, which have an uncertain upside at mature companies due to slow stock price growth.

Plus, corporations can bind engineers to two-year agreements or more, as part of the acquisition terms. This limits staff churn, which is a huge problem in finishing important projects when job markets re tight.

My advice to young engineers is don’t worry too much about your business idea and bootstrap your own venture with three pals.

Produce some great code, create and launch a service, then shop it around as a demonstration of your talent. Shop it through the guys that run the incubators — their prime value is their contacts at the Google, Facebook, etc. They know how to sell startups and they’ll sell yours for a fee.

Your venture will show that you can work well in a team; it shows initiative; and the rigors of the startup life demonstrate that you aren’t a bunch of lazy nine-to-fivers, and are able to crack your own whips to get work done when it needs to be done. It’s a self-selecting process that filters out those that say they can, from those that do.

Silicon Valley’s dirty little secret is that the startup boom is really a disguised job fair for big corporations.

Silicon Valley’s dirty little secret is that the startup boom is mostly a disguised jobs fair that directly benefits the big corporations. Occasionally, an innovative startup makes it past this stage but it has to be so bad that no one wants it — not even for its team. It’s from among those ugly ducklings that the swans of the new age emerge: FB, Goog, Twitter, Yahoo! and others — no one wanted them at first — then they couldn’t get enough of them.

A comparison of the two founders’ letter to shareholders reveals a surprisingly large difference in what motivates the rival organizations, what’s important to them … and what’s not.

Some industry watchers expected Mr Zuckerberg to try to best Larry Page’s eloquent and impassioned “Founder’s Letter” that launched Google’s IPO.

Both founders were close in age when they wrote letters introducing their company to prospective shareholders — an important document that sets and explains the company’s culture.

Larry Page jumps straight to the point: Google exists as a business so that it can make a big difference in the world.

He introduces the concept of “Don’t Be Evil,” a rule to guide senior management decisions. The doctrine of “Don’t Be Evil” was remarkable, because it demonstrated Google’s keen awareness of its growing power, and with that, a great responsibility to act ethically and to be careful in its actions.

Mr Page’s letter explained that Google’s ambitions for its social mission were greater than those set out for Google itself. In fact, the commercial side of the business would be used to fund the creation of Google Foundation, an organization that he expected would:

“Eclipse Google itself in terms of overall world impact by ambitiously applying innovation…to the largest of the world’s problems.”

How would Mr Zuckerberg trump Mr Page’s inspirational epistle?

His letter to shareholders starts off well, demonstrating a keen understanding of his assignment:

“Facebook was not originally created to be a company. It was built to accomplish a social mission — to make the world more open and connected.”

But that’s about as far as he gets. He spends many paragraphs saying pretty much not much at all, wishy-washy phrases, said in different ways: how Facebook enables people to share, that sharing is good, that open government is good, and that sharing helps people’s relationships; and how it’s good to connect people, and to give people voice. At times he makes Facebook sound like a phone company. Reach out and share with someone — it makes the world a better place.

In the letter, Mr Zuckerberg struggles to deepen a collection of shallow sentiments about Facebook’s social mission. He uses a bold typeface to emphasize key phrases:

“We hope to strengthen how people relate to each other.”

“We hope to improve how people connect to business and the economy.”

John Gapper, Chief Business Commentator for the Financial Times called the letter, “The unbearable vagueness of Zuckerberg.”

Mr Zuckerberg could have pointed to concrete examples of how Facebook was being used to “open” governments. The Arab Spring, the popular uprisings that spread throughout the Middle East in 2011 were at times called the “Facebook Revolution,” yet he makes no mention of his company’s key role in the matter.

At some point, Mr Zuckerberg realized he wouldn’t be able to beat, let alone match Mr Page’s letter, which is probably why the document is found deep within the SEC filing, on page 61.

Larry Page’s letter is right at the beginning of Google’s filing, even before page 1 — spanning seven pages numbered i to vii.

Mr Zuckerberg’s letter moves onto a different subject: a description of a core set of values, which he calls “The Hacker Way,” a homage to Hewlett-Packard’s celebrated “The HP Way.”

It is mostly expressed as slogans that are used internally, and repeatedly, a technique used to indoctrinate rather than educate:

“Done is better than perfect.”

“Code wins arguments.”

“Move fast and break things.”

“Focus on impact.”

The Wall Street Journal reported that on the day of the SEC filing, Facebook printed stacks of posters with the slogan: “Stay Focused and Keep Shipping.”

The use of slogans to help manage a workforce is interesting — outside of North Korea and Foxconn — it has long fallen out of fashion.

The Hacker Way explains Facebook’s failed and sometimes controversial projects, such as “Beacon.” There is no room to think if something might be “evil” if it turns out that way then as quickly as it was built it can just as quickly be dropped.

It’s not a very encouraging prospect because Facebook is large and getting larger — it can cause a lot of harm if it’s not careful. Google’s approach to think then act, seems far more responsible.

Mr Zuckerberg ends his letter by reminding staff: “We expect everyone at Facebook to focus every day on how to build real value in everything they do.”

It sounds threatening, rather than inspiring, as Mr Page sought to do.

It’s clear that Mr Zuckerberg doesn’t believe he needs to make a song and dance about “social mission” to motivate workers, or impress shareholders. Facebook is clearly a different company to that of Google — and maybe it also signals a new type of company, guided by a fast moving benevolent amorality.

I remember vividly the day Google filed its “red herring” with the SEC in preparation for its IPO. I was out at lunch when our bureau chief Richard Waters, called me, “They’ve filed.”

We were expecting it any day and this was the day, finally an end to what seemed an endless cacophony of speculation in the media and Wall Street about how much money Google was making, its capital costs, etc.

We would finally see the audited financial reports — and that document would immediately establish a new benchmark representing the business model to beat for this next generation of Internet companies.

My colleague Scott Morrison ran back to the Financial Times’ office by Union Square, where our hard working laser printers were churning and spitting page after page, hundreds of pages were piling up.

We had just 90 minutes to pour through the massive filing, and write the lead story for all the editions of the Financial Times, US, Asia, UK, Europe. Just 90 minutes to try and find and write the best news stories, looking at the same information that thousands of journalists were looking at. Our job was made tougher because our US competition had far more time, the Wall Street Journal and the New York Times faced relatively leisurely deadlines six hours away.

This kind of situation is exhilarating and it’s why I love journalism — there’s no time for procrastination, or anything else, you have to perform at your peak abilities with no margin for error.

As we combed through the numbers and page after page of dense text, looking for clues to a much larger story, we would call out anything interesting.

But it wasn’t the financial numbers that stood out the most it was the Founder’s IPO Letter written by Larry Page.

It was an extraordinary document. I remember thinking that here was a company that I could see myself working for, it was in no way typical of any Silicon Valley company that I knew.

The letter explained that Google existed to make the world a better place. Don’t be evil.

About 1% of revenues, plus other resources, would be used to establish the Google Foundation, designed to “eclipse Google itself in terms of overall world impact by ambitiously applying innovation and significant resources to the largest of the world’s problems.”

Wow. And Google was clearly no friend to Wall Street. The way Google intended to handle the IPO was to make sure the Wall Street brokerages didn’t run off with massive fees, or cut their top clients in on the sweetest deals. The pricing of shares would be handled as an auction using the same technologies Google used for its automated ad buying — ensuring that small and large investors shared a level playing field.

It’s a damn fine Founder’s Letter the best I’ve ever seen. I wonder what Mark Zuckerberg will come up with?

Take a lo0k at these extracts from: 2004 Founders’ IPO Letter - Google Investor Relations

Google is not a conventional company. We do not intend to become one. Throughout Google’s evolution as a privately held company, we have managed Google differently. We have also emphasized an atmosphere of creativity and challenge, which has helped us provide unbiased, accurate and free access to information for those who rely on us around the world.

…

Sergey and I founded Google because we believed we could provide an important service to the world-instantly delivering relevant information on virtually any topic. Serving our end users is at the heart of what we do and remains our number one priority.

Our goal is to develop services that significantly improve the lives of as many people as possible. In pursuing this goal, we may do things that we believe have a positive impact on the world, even if the near term financial returns are not obvious.

…

We are proud of the products we have built, and we hope that those we create in the future will have an even greater positive impact on the world.

LONG TERM FOCUS

As a private company, we have concentrated on the long term, and this has served us well. As a public company, we will do the same. In our opinion, outside pressures too often tempt companies to sacrifice long term opportunities to meet quarterly market expectations. Sometimes this pressure has caused companies to manipulate financial results in order to “make their quarter.”

In Warren Buffett’s words, “We won’t ’smooth’ quarterly or annual results: If earnings figures are lumpy when they reach headquarters, they will be lumpy when they reach you.”

If opportunities arise that might cause us to sacrifice short term results but are in the best long term interest of our shareholders, we will take those opportunities. We will have the fortitude to do this.

…

We encourage our employees, in addition to their regular projects, to spend 20% of their time working on what they think will most benefit Google. This empowers them to be more creative and innovative.

…

We believe a well functioning society should have abundant, free and unbiased access to high quality information. Google therefore has a responsibility to the world.

IPO PRICING AND ALLOCATION

Many companies going public have suffered from unreasonable speculation, small initial share float, and stock price volatility that hurt them and their investors in the long run.

…

We seek to achieve a relatively stable price in the days following the IPO and that buyers and sellers receive an efficient market price at the IPO.

… Our goal of achieving a relatively stable market price may result in Google determining with our underwriters to set the initial public offering price below the auction clearing price.

We are working to create a sufficient supply of shares to meet investor demand at IPO time and after. We are encouraging current shareholders to consider selling some of their shares as part of the offering.

These shares will supplement the shares the company sells to provide more supply for investors and hopefully provide a more stable price.

GOOGLERS

We provide many unusual benefits for our employees, including meals free of charge, doctors and washing machines. We are careful to consider the long term advantages to the company of these benefits. Expect us to add benefits rather than pare them down over time. We believe it is easy to be penny wise and pound foolish with respect to benefits that can save employees considerable time and improve their health and productivity.

…We are focused on providing an environment where talented, hard working people are rewarded for their contributions to Google and for making the world a better place.

DON’T BE EVIL

Don’t be evil. We believe strongly that in the long term, we will be better served-as shareholders and in all other ways-by a company that does good things for the world even if we forgo some short term gains. This is an important aspect of our culture and is broadly shared within the company.

Our search results are the best we know how to produce. They are unbiased and objective, and we do not accept payment for them or for inclusion or more frequent updating.

We also display advertising, which we work hard to make relevant, and we label it clearly.

This is similar to a well-run newspaper, where the advertisements are clear and the articles are not influenced by the advertisers’ payments.

We believe it is important for everyone to have access to the best information and research, not only to the information people pay for you to see.

MAKING THE WORLD A BETTER PLACE

We aspire to make Google an institution that makes the world a better place. In pursuing this goal, we will always be mindful of our responsibilities to our shareholders, employees, customers and business partners.

With our products, Google connects people and information all around the world for free.

Last year we created Google Grants-a growing program in which hundreds of non-profits addressing issues, including the environment, poverty and human rights, receive free advertising.

And now, we are in the process of establishing the Google Foundation. We intend to contribute significant resources to the foundation, including employee time and approximately 1% of Google’s equity and profits in some form.

We hope someday this institution may eclipse Google itself in terms of overall world impact by ambitiously applying innovation and significant resources to the largest of the world’s problems.

It’s a powerful message, and it’s worth re-reading every few years for a reminder that corporations can be created with a vision for a greater good, setting a bar higher than their mandated legal duties to shareholders.

The Founder’s Letter bears re-reading by its author. Larry Page and his team have slipped quite a bit on a few key things in the letter, such as making sure search results are the best they can possibly be, and that they won’t be corrupted with paid inclusions, and that all advertising is clearly labelled, (which should include Google’s own services). Plus, what’s up with Google Foundation and the promise to fund it with significant resources and money?

Let’s see what inspirational ideas Mr Zuckerberg comes up with in his Founder’s Letter, and let’s see how he and his management team fare in sticking with their version of Don’t Be Evil over the coming years.

Facebook readies to file US$5bn IPO, could grow -IFRe

If the report is accurate the relatively small number of publicly traded shares would help support a high valuation. This might be necessary if the value of Facebook in private markets continues to increase before the IPO, which is expected in May 20212.

The small float, however, would increase by the end of the year as insiders and employees become eligible to sell their shares after a 6 month lockup period, and cash in before the holidays, by some estimates, creating more than 1,000 millionaires . A small float would help ensue that Facebook staff are able to sell at a high valuation.

The competition among Wall Street firms to lead the IPO looks to be won by Morgan Stanley, with Goldman Sachs, Bank of America Merrill Lynch, Barclays Capital and JP Morgan in supporting roles, writes Anthony Hughes and Stephen Lacy. The report says that Facebook decided against Goldman as lead because of the huge controversy it caused last year when it botched a large private offering of Facebook shares.

Facebook’s “Red Herring” its financial report could be out as early as tomorrow, February 1. It will give prospective investors the first audited look at the company’s business. So far, unsubstantiated rumors have discussed 2011 revenues of $3.8 billion and an operating profit of about $1.5 billion.

A small share float is controversial because it can cause volatility in the share price. The Groupon IPO was heavily criticized for having a very small float of about 5% of its shares.

A smaller IPO will increase demand for Facebook shares and therefore its valuation. It will also give Facebook options to increase the number of shares available prior to the IPO while still keeping a tight hold over pricing.

In private markets the company has about a $85 billion valuation. It needs to make sure that its IPO valuation exceeds its private one by a broad margin and the best way to do that is by making sure demand for shares is far higher than supply.

Marc Andreessen

(Photo:By Joi Ito.)

Marc Andreessen and Ben Horowitz made their reputation as savvy investors by making lots of small seed investments of up to $100,000. This then helped them raise billions of dollars, $2.7 billion so far, with the latest $1.5 billion fund announced today.

Mr Andreessen tells CNET’s Paul Sloan that, “The opportunities seem very large.” In his column “Bootstrap” he reports that Mr Andreessen is on a quest to find the next Zuckerberg, Bill Gates or Larry Ellison. There’s no mention of a Larry Page…

But can seed investment success scale to a $1.5 billion fund? The size of the fund precludes it from managing $100,000 seed investments. A fund that large could seed more than 15,000 startups. But it could not hope to find or manage that many investments, which means it has to go for later stage investments — which is not a proven specialty for the Andreessen Horowitz funds.

So far, Andreessen Horowitz’s biggest success was its investment in Skype, which ended up getting bought by Microsoft. That was part of the firm’s first fund. The second fund has investments in biggies like Facebook, Twitter, Groupon, and Zynga. Andreessen Horowitz has been criticized for getting into some of those companies late, but Andreessen says the valuations have risen since investing in them.

…

Overall, though, it’s too early to call the strategy a success. “We just don’t have the results on most of the money,” Andreessen said.

An area where the investment duo have been able to put large sums to work has been in the private secondary markets where they bought into companies such as Facebook, Twitter, and Zynga. And it is in this shadowy market that some of this new money is likely to be used.

However, are there enough new private ventures to invest in? Or will the huge fund end up inflating the value of private shares in the already existing favorites? This could cause problems when those companies file for an IPO in that there could be little upside left for investors. Which means it could hurt prospects for other tech IPOs.

The likely result is that secondary markets will continue to be an important source of capital for many startups despite concerns that there are few regulations protecting investors. And with large funds being active in these secretive markets valuations of private companies could become highly volatile because of the lack of liquidity — something which is moderated in public markets because of the larger pool of available investors. Volatility and inflated valuations could be damaging to the growth of young companies.