Jonathan Miller, the man who was ungracefully booted as AOL CEO, and Ross Levinsohn, the former Fox Interactive Media chief who was never quite as in charge of MySpace as he would have liked, will form a new group at VC firm ComVentures, SAI reports. They’re callng it Velocity Interactive Group. The pair plan to invest $20 million to $30 million in digital media startups in 2008 and already, they plan to close as many four deals in February. Wait, doesn’t this sound familiar?

That’s because Miller and Levinsohn had announced in August a similarly named vehicle, Velocity Investment Group, for investing in startups, in conjunction with General Atlantic Partners, a buyout fund. That Velocity never lived up to its moniker, apparently.

No matter. The real question is, do you want to sell your startup to these guys? Ross Levinsohn may have access to $1 billion in funding now, but he’s still the guy “bullying around little startups, demanding special deals because he’s a famous CEO,” as a source once told us, explaining why legendary angel investor Ron Conway can’t stand the guy. As for ex-AOLer Jon Miller, well, he’s not exactly a king of Pessinus.

Venture capital’s ancien régime has been overturned. We hear Mark Zuckerberg, the founder of Facebook, has cashed out — before an IPO, before a sale, and before his investors. In the company’s recent financing round, insiders believe, he sold about $40 million worth of stock. A tiny portion of his $5 billion stake, but in cash rather than on paper, and “enough that he never has to think about money for the rest of his life,” says a person made privy to details of the sale. On the Sand Hill Road of old, this is simply not how things are done.

But Zuckerberg’s most important backer, Peter Thiel, does not work on Sand Hill Road. From his offices in San Francisco’s Presidio, he’s set about changing the rules of how startups get funding and how founders make their fortunes. Through his Founders Fund, he has begun issuing “Series FF” shares to the entrepreneurs he backs, giving them the right to sell shares alongside their companies to new investors. Thiel, who felt unjustly treated as the cofounder of PayPal, wants to let his protégés build companies without worrying about how to make rent.

Old lions like angel investor Ron Conway will probably view this development with outrage. They feel entrepreneurs, with no capital at risk, should not become rich until well after their already wealthy backers get paid, Today’s startup generation begs to differ. The IPO market is still a shadow of its former self, and sales to large companies are an unreliable route to wealth — and a sure way to lose control of one’s company. Meanwhile, vast pools of private money are waiting to be tapped.

Zuckerberg still owns nearly a third of Facebook — and even if Facebook flops, the 23 year old is set for life.

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Silicon Valley entrepreneur Stanley Kirk Burrell, who sometimes goes by another name and often wears very large pants, as the video above, has teamed with Flock founders Geoffrey Arone and Anthony Young to launch DanceJam, a new online video site. Burrell is perhaps best known for pairing with videoblogger Justine Ezarik of iJustine to endorse Y Combinator’s MySpace profile tool.

Burrell told the Financial Times he spoke with angel investor Ron Conway prior to teaming with Arone and Young on DanceJam. In an interesting side note, business partners might be surprised to learn that prior to his tech career, Burrell also dabbled in music. He’s perhaps best know for his 2006 album titled Look Look Look. And here’s a picture of Burrell with fellow entrepreneur Jay Adelson, the CEO of Digg.

The Valley’s venture capitalists fall into and out of love with enterprise software. Today, with Facebook and other social networks the talk of the town, it’s hard for the makers of boring IT products to get attention. But not, it seems, money. Splunk, in a lightning-fast fundraising effort, has pulled in $25 million in a third round of financing, bringing the company’s valuation up to $120 million. Splunk’s software analyzes server logs, and in a nod to the collaborative aspects of Web 2.0, lets sysadmins share and discuss the results to figure out if odd patterns are signs of system failures or security breaches. Think of it as a Google for hardcore nerds, but one they’re actually willing to pay for. And that, in turn, made Ignition Venture Partners, a Seattle-area venture-capital firm, willing to pay for a stake in the San Francisco company. In every investment, there are winners and losers, though.

The obvious winner is Splunk, which has commanded one of the highest valuations assigned to a software startup in recent times. Splunk also wins the services of John Connors, right, the former Microsoft CFO who’s now a partner at Ignition, who’s joining the company as a board member.

And the losers? Rory O’Driscoll, left, of Scale Venture Partners, whom Splunk turned down despite bidding to invest at a higher valuation. O’Driscoll indiscreetly complained last week of his disappointment at losing the deal — and no wonder, since Splunks fits in several areas Scale likes to invest in. Also shut out, with a lowball bid: Famed angel investor Ron Conway. Could this be what preoccupied him at last Thursday’s party for iLike?

Splunk CEO Michael Baum, though, seems to be celebrating a bit overmuch. In a blog entry last week, in which he alludes to his company’s fundraising, Baum writes:

It’s a privilege not a right for investors to take a look and consider partnering up with you.

How privileged Connors must feel. How gratified he must feel to be serving on a board with Baum, who signs his blog posts “thebaum.” It must be just a little bit of a comedown to go from managing multibillion-dollar budgets at Microsoft to having terms dictated by a cocky startup CEO.

“Many publishers consider the Internet, and Google in particular, a greater threat to their livelihoods than Osama bin Laden.” A Los Angeles Times opinion column argues that the Google’s new comment system, which allows a news article’s subjects to give their side of the story, will be the death of journalism. [Techdirt]

Source:Valleywag
“If I were, I wouldn’t say anything, and if I weren’t, I wouldn’t say anything.” — Microsoft CEO Steve Ballmer, when asked by newsman Charlie Rose if the tech goliath was in talks to buy internet megasite Yahoo. [Tech Trader Daily]

Source:Valleywag

The first rule of Valleywag: Never pitch Valleywag. But sometimes the temptation just proves too great. In response to a post about Google and Yelp’s rivalry in local search, a MerchantCircle employee contacted us to tout the company’s supposed leadership in the market, pitching the site for some Valleywag love. Well, here’s some tough love. We’ve looked into MerchantCircle’s business model .. and found nothing but self-love.

Here’s the pitch:

Recently, you guys ran a piece comparing Google versus Yelp, and while Yelp gets a lot of ‘cool’ buzz, they only reach a few big cities and have not captured the practical, business side of the puzzle. MerchantCircle (one word) is about to announce tomorrow that we’ve passed 200,000 local small business owners signed-up. That number makes us the leader in a space that everyone is trying to get a piece of right now.

We have more merchants than Google, Yahoo Local, CitySearch, Insider Pages and any other local directory site you can think of.

Well, that’s nice. Suspect, but nice. But then we started digging.

• MerchantCircle might have businesses listed, but it has practically no users. Site traffic, according to Compete.com, is a fraction of the nearest competitor’s.
• No wonder: It’s theoretically possible to browse the directory of listings, but the MerchantCircle site itself is designed as a roach motel for merchants.
• The boasted merchant listings are questionable. Many appear to be prepopulated from databases, or possibly “scraped” — copied wholesale — from other sites. Take this listing of San Francisco restaurants, for example: Most have little more than addresses.
• MerchantCircle appears to be using automated systems to cold-call local merchants. Like Yelp, MerchantCircle touts user ratings as a reason for businesses to sign up for the site. But unlike Yelp, MerchantCircle isn’t waiting for there to be any actual user reviews. For some time, MerchantCircle has been autodialing businesses in an effort to convince them that users may have left bad ratings about them on the site. Never mind that the reviews — and the users — may not exist in every case. For local businesses, which rely on the phone to attract customers and make sales, autodialing is a thousand times worse than email spam; wasting time with an automated system is the same, in their minds, as taking money from their pockets. Lying is just the icing on the cake.
• MerchantCircle CEO Ben Smith promised to stop the autodialing — but it’s continued.contacted Smith about the practice in September 2006. Smith claimed “that he’s on it.” According to the comments businesses are still leaving on blog posts about MerchantCircle, the practice continues to this day.
• The company is counting on search-engine optimization, or SEO — the art of tweaking websites to make them rank highly in search results — for traffic. So far, it’s failed. But even if MerchantCircle’s attempts at SEO worked, Google and the other search engines would rapidly catch on and banish MerchantCircle’s pages from their indexes.

MerchantCircle’s business model has evolved into a circle jerk: Rather than persuading actual users to visit its listings, MerchantCircle is styling itself as a social network for local businesses which link to each other’s profiles on the site. But if you ran a local shop, would you rather raise your profile with the Chamber of Commerce, or get actual customers in the door? As with any such arrangement, this circle is likely to leave local businesses exhausted and unsatisfied.

Which raises the question, why are Valley notables giving this company a hand? Among the company’s investors and advisors are Scale Venture Partners, Disney’s Steamboat Ventures, Ron Conway of Angel Investors, Auren Hoffman of Rapleaf, and — ironically enough — Chas Edwards, a vice president at Federated Media. His boss, Battelle, must be so proud.