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Innovation Economy

Venture firms and start-ups to watch

By Scott Kirsner
Globe Correspondent / December 21, 2009

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Highlights from Scott Kirsner’s Innovation Economy blog. For the full blog, visit www.boston.com/innovation.

It’s December, and that means journalists crank out “year-in-review’’ lists. Here are two “top five’’ lists from the Innovation Economy blog, one of which looks ahead and one of which looks back. The first is my take on start-ups worth watching in 2010, and the second is a selection of the venture capital firms that mattered most on the local scene in 2009.

Five start-ups to watch:

■HubSpot. The Cambridge software and consulting company has proven itself a master at promotion and positioning: Those who know about HubSpot (through its blogs, live webcast, or the recent book written by its founders, “Inbound Marketing’’) know the company’s software helps you get found on the Web and manage incoming leads. But can the company become a significant national player while ensuring that its customers keep renewing their subscriptions to its software?

■Heartland Robotics. iRobot cofounder Rodney Brooks has taken a leave from his prominent post at MIT to start a new venture. Heartland has been short on specifics, but Brooks seems to be developing a new generation of robots to be used in manufacturing. The company’s investors include Waltham-based Charles River Ventures and Bezos Expeditions, the firm that manages investments for Amazon.com founder Jeff Bezos.

Kayak. Can a $60 million marketing budget, a chief marketing officer, a fusillade of TV spots, and a new slogan (“Search one and done’’) turn the travel search site into a household name? The Concord- and Norwalk, Conn.-based company found that only 32 percent of the 120 million people in the United States who use the Web to book travel were familiar with it. Elevating that number will be key to an eventual Kayak IPO. Kayak’s 2009 ad spending represents almost half of its revenue for the year (expected to hit $150 million).

■On-Q-ity. It aims to provide doctors with new diagnostics tools to help customize cancer treatments. It was founded by Mara Aspinall, a former Genzyme executive, and is fueled with $26 million in venture capital funding, some of it from Atlas Venture in Waltham and Bessemer Venture Partners in Wellesley Hills.

Sun Catalytix. You want big picture? Here you go: Solar panels on your roof produce electricity that Sun’s device will use to separate water atoms (clean or dirty) into their hydrogen and oxygen components. The hydrogen is used to power a fuel cell, which can charge up your plug-in hybrid vehicle or power your house at night. The technology, developed by Dan Nocera at MIT, received a $4 million grant from the Department of Energy this year, along with $3 million from Waltham-based Polaris Venture Partners.

Five venture capital firms that mattered most in 2009:

■Founder Collective, Cambridge and New York. The newest firm in town is a $40 million seed-stage venture fund run by entrepreneurs, not career investors. Founders Eric Paley and Chris Dixon had big hits selling companies to 3M and McAfee; David Frankel built Africa’s biggest Internet service provider. Boston’s Flybridge Capital Partners gave Founder Collective a boost and housed the firm for a stretch earlier this year.

North Bridge Venture Partners, Waltham. Super-secretive, stodgy North Bridge continues to be one of the most active and broadly focused firms in town, putting money into areas like solar cells, stretchable silicon, virtual currencies, quantum dot display technologies, and open-source software.

North Bridge was the largest shareholder in A123 Systems when the Watertown battery maker went public in September; though North Bridge can’t unload its shares for six months, the A123 IPO at least proved that North Bridge could find an exit with a cleantech investment, something most other VC firms have yet to do.

Also in 2009: Starent Networks, a North Bridge company that was already public, was acquired by Cisco for $2.9 billion.

Polaris Venture Partners, Waltham. Opened Dogpatch Labs Cambridge, a free incubation space for entrepreneurs, in September. Polaris portfolio company LogMeIn, in Woburn, went public in July, and Polaris was the second-biggest shareholder (after Needham-based Prism VentureWorks.)

Athenix, a Polaris portfolio company making biotech products for agriculture, was acquired for $365 million by Bayer CropScience in Germany.

And despite the high-profile shutdown of GreenFuel Technologies in May, Polaris continues to place bets at the intersection of biotech and cleantech, with companies like the aforementioned Sun Catalytix. Most people expect Polaris to go to its investors to raise a new fund in 2010.

Spark Capital, Boston. Boston techies are interested in one Spark investment in particular: Twitter, where partner Bijan Sabet joined the board last year. The San Francisco company has raised $155 million, but has yet to start offering a service or feature that someone might pay for. (The company is making some coin from its search deals with Google and Microsoft.)

Sabet also helped introduce the weekly OpenCoffee gathering to Boston, and he’s an active blogger and Twitter user. Spark partner Rob Go has been an early advocate of Open Office Hours, when anyone can come meet with him to get feedback on a business idea.

All that said, Spark is very much focused on New York and California, with only three active investments (VeriVue, Linkwell, and 8DWorld) in the Boston area. Spark also helped bring the TechStars entrepreneurship program to Boston.

■Third Rock Ventures, Boston. Third Rock, founded by veterans of Millennium Pharmaceuticals, was launched in 2007 with a $378 million fund. Taking a very hands-on approach to launching life-sciences companies, Third Rock has backed seven start-ups, in areas like obesity, epigenetics, cardiology devices, and health monitoring. (Two more nascent companies, in devices and protein therapeutics, have not been announced.) In July, Third Rock brought three new partners on board, including the former chief executive of Interleukin Genetics and a recruiting expert from Cubist Pharmaceuticals.