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Yesterday's news story about six year old Falcon Heene yesterday supposedly stealing his father's home-made balloon for a joyride was the best story I've seen in years. It had everything - an air chase, a ground chase, and multiple happy endings (the first, when a gallant rescuer made a grab for the craft as it descended and helped pull it to ground in one piece - the second when Falcon was found hiding in the attic after letting Daddy's toy adrift).

As we all know now, Falcon was hiding in the attic of his family home the whole time. Interestingly, about fifteen minutes into the piece, someone left a comment on MSNBC saying "he's probably hiding in the basement, trying to escape the whipping of his life". Attic, basement - that person should start a 1-800 business. There's also an interesting comment from Falcon himself ("we did this for the show") - see above.

Watching yesterday's story, I was reminded of the very first manned balloon experiment, which took place in Paris on the 19th of September, 1783, aboard a handsome balloon - the Aerostat Réveillon - designed by Jospeh and Etienne Montgolfier, the 12th and 15th-born sons of an Annonay family of paper makers.

The balloon's creator's did not wish to expose themselves to the uncertainties of flying but instead placed aboard a sheep, a duck and a rooster. With the success of the flight, performed in front of Louis XVI and Marie Antoinette, they followed it up with a flight two months later in which a doctor, Pilâtre de Rozier, and an army officer, travelled nine kilometers, and soared to 3,000 feet.

And here, we leave Wikipedia for myth. A popular myth among balloonists is that the aforementioned doctor had some concerns they may, in dropping from the sky, be taken for the eighteenth century version of aliens. So he took the precaution of including a bottle of fine French champagne aboard the craft - so that anyone arriving with pitchfork in hand could be convinced as to their authenticity as Frenchmen.

Travelling by balloon is so much fun, and so frivolous and grin-inducing, that I'm inclined not to disbelieve this, just because in this case, the truth really doesn't matter. And as for our future-past time-traveller, he/she could do worse than arrive back in our period of history with a bottle of champagne aboard his craft. At a minimum, it would help smooth their introduction.

The normally-sensible Straits Times came out with a story this money that breathlessly predicts the current "capital bubble burst" will cause the world's innovators to run short of funds by 2012. The also normally sensible Adeo Ressi of TheFunded.com was quoted as saying:

"I consider this the first dark sign of really bad collapse coming in 2010. The system needs new money to fund new ideas or the world will face a breakdown in innovation by 2012."

I predict the opposite will happen. If capital raising indeed remains a tough game, that will translate into good news for the funds able to raise it, and the community as a whole.

Why? The community will grow smaller, smarter and stop investing in every startup that walks through the door. It will start becoming rather more picky, and possibly begin providing the best returns ever on investment on the basis of a more finely-tuned investment strategy - a move that in itself is long overdue.

I'm halfway through Richard Dawkin's "The Greatest Show on Earth" and enjoying it immensely - except for the parts where Dawkins inexplicably gets in behind a minor argument that is distracting to the important one he is arguing - and potentially annoying to the readers that want to read him most.

For example, at one point, after a lengthy chapter about how pedentic zoologists can be with respect to class naming conventions, Dawkins takes us to a footnote to explain, basically, his prejudice in favor of colonial-era names for foreign cities, such as "Peking" instead of Beijing, and "Bombay" instead of Mumbai.

His book is written in English, he explains, so the use of "Peking", rather than "Beijing", should be expected, and, by inference of the tone of his explanation, henceforth encouraged.

I simply don't understand this. The majority of English words have foreign origins - including, no doubt, Peking. And it is perfectly natural that the Chinese should wish others to use the name that they themselves use for their captial city. In discussions with Beijing-ren in Beijing, I have found them quite attached to the name and rather more fond of their own entimologies ("Bei-jing" properly identifies the capital as the "northern capital", as opposed to the older, southern capital, "Nan-jing").

It's a strange thing - when caught using the word "mankind" to formulate an argument, Dawkins quickly (and properly) apologizes to women for the linguistic slight before continuing. He correctly uses the word "Inuit" to describe folks the old colonists of the polar regions knew only as "Eskimos". So what is so wrong with calling Beijing, "Beijing"?

With this argument, Dawkins stops the reader in his tracks, and asks him to question the author's broader judgement based on something far less important than his main theme - the evidence for Darwin's theory of evolution. Which is unfortunate - if the Gallup stats are right, Dawkins already has more than enough opposition. He doesn't need China and India in the opposite corner as well.

I think when it comes to "pay to pitch", there are some additional subtleties that need to be discussed. Sometimes, the entrepreneur is not really serious about his stated intentions: he has no intention of taking on the fight he is proposing.

Yes, not every entrepreneur pitching wants the money, or the advice. We are all aware, I'm sure, of examples of this - there are some people out there that, when pushed, will stop short of taking the final step. These "weekend rock stars" just want to be able to tell their friends they "gave it a shot."

I'm sure the same is sometimes true with investors as well - lack of sincere intent. How can an entrepreneur even know if the angel in front of them truly has the ability to invest? They may be out of investment dollars, but still want to appear to be in the game. There is no way for the entrepreneur to know.

If the investor does have money to invest, why the need for the fee? Any decent-sized investment outfit has a team of analysts in place (or at least one) for the purpose of protecting their principals from time-wasting business plans - and moving plans forward through due diligence. Investor has zero support staff? Don't waste your money on pitch fees.

The test for both sides is sincerity of purpose. If the entrepreneur is truly ready to take the risk and is willing to take investment and advice in support of building his enterprise, he should not have to pay to have his story heard. If an investor is truly in the business of investing, and has the capital and staff to support that activity, there should be no need to charge fees.

Note re coaching: I disagree with some of the comments re coaching. I think this can be money well-spent. There are some really, really smart people out there that are incapable of writing a business plan or setting pricing for their services - because their smarts lie more in the area of storage array design or protease inhibitor innovation. For these folks, paying an Excel jockey or a business coach may be the difference between being able to articulate a business and floundering in obscurity.

*If you're getting a sense of deja vu reading this, this blog first appeared on Fred Wilson's A VC blog this morning as a comment.

Search engine startup Surf Canyon just landed a small amount of money today. IMHO, they should have been handed a huge chunk of change - 10x at least.

I just went over to their site and tried three searches - one of them for information relevant to DealHorizon.com. The results blew me away. Twitter, correct order, correct levels of importance - finally, someone is taking into account the publisher's view of content relevance.

The results they listed were so much better than any of the majors, I was - for the first time in weeks - left really impressed with something new.

It's always nice when a startup - and especially a new search engine - delivers on its promises.

Great job, SurfCanyon.

Michael Arrington at TechCrunch posted a great video up to docstoc.com from his blog today - Aaron Patzner reveals what he learned from Mint.com that could benefit other startups:

Startup Building 101 -

This article from Xconomy writer Greg Huang is a 'must-read':

Royalty-Based Venture Financing, Born in Boston, Could Shake Up VCs and Startups from New England to the Northwest

I think everyone has a place in their heart for California. I certainly do - I lived there for seven very happy years. But things seem to be reaching a crisis point in that state now. There have been a raft of articles lately claiming that the Golden State's days are over. Can it be?

The Guardian went so far yesterday as to repeat the claim that California is on its way to becoming America's first "failed state", quoting net emigration losses, hunger-striking teachers, and California's recent issuance of IOUs to government employees as evidence.

From my narrow perspective, things seem to be continuing much as before. Venture capital investment into new companies in California continues unabated (yes, the downturn has affected things, but on a weighted basis, CA has not stopped relative to other economies).

In fact, according to data compiled here at DealHorizon.com, more than $7 billion in equity investment has gone into California-based firms since the start of 2009, not counting investment into public companies via PIPES, or debt-based instruments. That number includes some of the top investment recipients this year, worldwide - such as Facebook, Twitter, and Pacific BioSciences.

The California venture industry remains the largest of any economy in the world. CA firms have also been among the most successful at protecting investor returns and raising new funds this year, with several funds registering new multi-hundred billion dollar funds.

Despite the economic downturn, the firms remain the most active in the nation as well. California venture firms took five of the "ten most active" positions in the PWC MoneyTree report for Q2 2009. The next most active state? Pennsylvania, with two firms.

Perhaps what is emerging is a glimpse of the make-up of future states. More than any other state in the US, California is the home of invention.. which means efficiencies leading to labor-reductions, changes in the tax contribution base, and different infrastructure and education requirements may show up here first.

If that is true, what could be emerging is not a dying state but a parallel "two Californias" - a set of older, more labor-intensive industries that are rapidly reducing in scale (and as a result, paying less in corporate taxes), and a set of industries that are more capital-efficient, but employ fewer people, which creates an increase in the unemployement rate (and possibly a deficit of personal taxes.)

It is possible to survive this set of changes. Singapore, a country in which I happily resided for twice as many years as Califonia, battled through similar problems related to technology shifts earlier this century and not only made it to the other side, but has prospered.

Singapore's tax rate remains one of the lowest in the developed world, unemployement is a miniscule 3% (one quarter that of California), and the country's government is moving everything - education, policy, infrastructure, investment - in behind a strategy of keeping the populace competitive and prosperous.

California's education system, infrastructure, and policies towards business, in stark contrast, are getting worse. According to the Guardian's report, 30% of California's 19 years olds were in university last year, down from 43% in the mid-nineties. CA's infrastructure is tired (especially compared to what is happening in my home neighborhood in Florida). Doing business is CA is so unweidly, it's hard to consider setting up an HQ there with so many attractive alternatives available to new businesses.

Singapore's advantages in the area of governance include a smart set of folks that are paid well and look out far into the future, and a system that enables them to work together without the distraction of constant sniping or petty politics. In more than one sense, the whole country acts as a kind of giant, successful venture capital firm.

One hopes that California's politicians will rally and make the tough decisions and act beyond their petty short-term political goals. But a decade of inaction would indicate that it is unlikely that fundamental positive change will come from the incubents.

The next hope? California could become endowed with a government willing to make tough decisions by virtue of a plan being drawn up by the governor's office to redraw the electoral map. It's a long shot, but I think we'd all love to see it come off.

Note: A quick search using the excellent ZoomProspector tool indicates the degree to which some of California's cities are losing ground relative to other cities on the basis of education standards - but also the intellectual strength of other cities, such as Menlo Park. Two thirds (66.78%) of Menlo Park's 30,736 residents have a batchelor's degree or higher.