Near the start of the financial crisis, Perkins began trying to sell his epic yacht, the Maltese Falcon, seen in the attached 60 Minutes clip. He also put his palatial, $20 million Belvedere home on the market.

Things are now looking decidedly up. The uber venture capitalist, who co-founded top-tier VC firm Kleiner Perkins Caufield & Byers, is now said to have yanked the Belvedere house off the market. And he's scooped up yet another pad: Perkins bought a $9 million, 4,800-square-foot penthouse atop the brand new, 60-story Millennium Tower in San Francisco. The story, first reported by the blog Front Steps, was confirmed by Bloomberg, to whom Perkins said, "It's a good time to buy things other than paper."

Perkins had reasons to be so optimistic: His condo buy was reportedly financed by the sale of that yacht, which had languished on the market for more than a year. Billionaires, it seems, are finally spending again. Hallelujah.

Business Insider has some nice pictures of the building, inside and out.

(Pic: One of Millennium Tower's "Grand Residences," via Millennium Tower.)

"We are seeing... good people leaving their jobs and joining startups, which is always a sign of confidence," a partner at Redpoint Ventures told the Beeb. "We are entering a stage of new reality." Apparently, there's talk of a boom. A handful of medium-sized companies most people have never heard of were recently acquired — Mint.com, OmniTure, SpringSource — and venture capitalists are dribbling out some cash from the oceans of money they are paid to invest. The Nasdaq has limped its way past the 2,000 mark again.

But enough of the selective evidence. Unemployment is still nearly 10 percent. The flow of capital outside the Valley startup bubble is still severely constrained. And even within the tech sector, the big paydays are few and far between. The IPO pipeline is dry, and startup buyers like Google and Yahoo have tightened their purse strings. This is why hot companies like Twitter, which is taking a fresh $50 million even with a reported $30 million in the bank, are stockpiling cash. Many are unprofitable, which also helps explain why, like Facebook, many have no plans to IPO any time soon.

This sort of brutal assessment is frowned upon in the Valley, where the hope of a big payday can get engineers working long hours for cheap, lawyers accepting scrip as payment and gullible investors pumping money into unworthy ventures. Hence, hype all too often prevails, despite an utter lack of profits or even, as is the case today, any big speculative infusions of cash from the equity markets. That's not a "new reality;" it's a cycle as old as the State of California.

(Image via)

We can understand the appeal of WeedMaps, which TechCrunch describes as a "Yelp for cannabis clubs," on Sand Hill Road, the epicenter of the venture-capital industry. But we're stumped on who the mystery buyer is (assuming Hartfield isn't just making this up to drum up interest). Really — which venture capitalist isn't a closet pothead?

(Pothead via The Deaf Sage)

There are any number of experienced investors Google might have recruited for its fund. While small in size, Google has a formidable brand and the promise of an easy path to a sale for any company it invests in. Which makes Google's money-manager picks notable.

One partner in the new fund, Rich Miner, was previously an entrepreneur who cofounded Android, a mobile-phone software startup bought by Google in 2005. No surprise there, since former entrepreneurs often become venture capitalists. But they're usually paired with seasoned financial types.

That doesn't exactly describe the other partner, Bill Maris, who has a curiously thin resume. His most notable job before Google? A small San Francisco venture-capital firm named Catalytic Health which hoped to raise the unambitious sum of $10 million. It's not clear if Catalytic Health ever raised money, or made any investments. But no matter. Maris's partner in the firm was Anne Wojcicki, a healthcare investor who went on to consummate a successful merger: She married Google cofounder Sergey Brin in 2007.

It is an unprecedented amount for a company unburdened by the messy reality of taking money from paying customers. Twitter has raised more than $20 million in two previous rounds of financing. And its new investors, which include Benchmark Capital, an early backer of eBay, and IVP, a less distinguished Silicon Valley financier, are only getting 15 percent of the company for their $35 million, a much larger amount than rumor had Twitter raising. Here are bullet points from an email that Twitter CEO Ev Williams (above) sent to investors:

* Twitter has raised a new round of funding from Benchmark and IVP
* Yes, the round was $35M
* Major existing investors include USV and Spark
* Existing investors also includes CRV, Digital Garage (from Japan), and an impressive stable of angels
* Benchmark's Peter Fenton will be joining Twitter's board of directors
* Twitter is committed to building a strong, independent company

Cofounder Biz Stone claimed in a blog post that the company had "significant capital" from last year's $15 million round with Spark and USV. Translation: Twitter has spent a large part of that sum in the past nine months — but it's not completely broke.

A strong, independent company is a longshot, considering that Twitter must pay cell-phone companies to deliver its short text updates to users' cell phones, while not pulling in compensatory revenues. Twitter's best hope is a buyout — and what its investors have just done is give it a better hand to bluff with, until it suckers some larger Web company into figuring out how to turn Twitter's 140-character-long updates into cash.

Last summer, the company settled a dispute with a rival social network, ConnectU, that dates back to the founding of Facebook in CEO Mark Zuckerberg's Harvard dorm room. ConnectU's lawyers — whom the site's founders have since fired — revealed that the case was settled for $65 million in a newsletter bragging about their firm's accomplishments. And now the Associated Press has obtained a court filing which shows the exact breakdown of cash and stock Facebook used to settle the case: $20 million in cash, and 1,253,326 shares of Facebook stock.

That's no mere detail. ConnectU's ex-lawyers at Quinn Emanuel Urquhart Oliver & Hedges are pursuing legal action against ConnectU's founders — Divya Narendra and Olympic-rower twins Cameron and Tyler Winklevoss — to get them to pay $13 million. In other words, a 20 percent cut of the supposed $65 million settlement. But is the settlement really worth $65 million?

In October 2007, Microsoft paid $35.90 a share for $240 million in Facebook preferred stock, which only garnered it a 1.6 percent stake in the company. Preferred stock, the kind usually purchased by venture capitalists, have more rights and protections than common stock, which is the type owned by founders and issued to employees. And when a company is private, it's typical for preferred shares to have a higher value than common shares.

ConnectU's settlement was issued in common shares. And an appraisal Facebook conducted to value the shares it issued to employees valued the company at $3.7 billion, or $8.88 a share — making the stock part of ConnectU's payment only worth $11 million, and the total $31 million.

The uncertain value of Facebook's stock must be why ConnectU's ex-lawyers are in a dispute. If it had been paid in cash, why would they be arguing over how much the lawyers were owed? Instead of having $65 million, the Winklevosses and Narendra find themselves with $20 million in cash, a $13 million legal bill-and 1.25 million shares of Facebook that aren't worth nearly as much as they thought.

How little? An informal market for Facebook stock exists, though it's not publicly traded. Vulture investors are offering to buy shares for as little as $2.50 apiece. At that price, the company as a whole is worth $1.3 billion. That's less than Yahoo reportedly bid for the company in 2006.

And that's where Facebook could really get into trouble.

We hear that Facebook's salesforce had a series of panicked meetings last week as its salespeople tried to drum up more business. Google is actively working to steal advertisers away from the company, which has struggled to come up with new marketing products based on its users' relationships. (It does not help matters that Facebook COO Sheryl Sandberg, who worked in the Clinton Administration before joining Google to run customer service, has no real sales experience, as much as she likes to claim otherwise.) Meanwhile, Facebook continues to spend money as it attracts new users; every million users Facebook adds requires approximately $1 million in new servers.

So Facebook will probably need to raise money soon, and it will have to give up a far larger percentage of the company this time-a scenario its executives have dreaded, but which they have few ways to avoid. It will likely have to make whole Microsoft and other investors who bought in at a $15 billion valuation by issuing them new shares. That will further dilute the stake owned by employees, which will hurt morale and possibly lead to defections. If it loses key salespeople and engineers, Facebook will lose further momentum. The prospect of a death spiral is very real.

Right now, Zuckerberg's problem is averting disaster. After that, he can worry about how to get Facebook's value back up to $15 billion.

New York magazine sent Will Leitch to explore the crazy phenomenon of Twitter and why it's not making any money. Cofounder Biz Stone told him worrying about money was so New York. How San Francisco!

The nonchalance Stone (left) and Twitter CEO Ev Williams (right) display about making money seems incomprehensible from elsewhere in the country. Wall Street and Detroit are supplicants in the nation's capital, dependent on billions of dollars in government largesse for their continued existence. Unemployment in the state of California is at 9.3 percent, nearly two percentage points above the national average, and the state is running out of cash.

Such is the genius of the Bay Area's startup factory: Money's not the point. The region is still awash with money, and doesn't know where to put it. One venture capital firm, Accel Partners, recently raised $1 billion in new funds. What it's short on is ideas.

And Twitter is an attractively simple idea: short bursts of text broadcast to the Internet from the Web or a cell phone, meant to update a set of friends on what the user's doing. Jack Dorsey, the engineer who came up with the notion and was Twitter's CEO until he was ousted from the job last year, Twittered two years ago, "One could change the world with one hundred and forty characters."

Twitter could be the future of news, the future of communication, the future of marketing, the future of just about anything! That's because right now, it's nothing. It has 6 million users, a pittance compared to Facebook's 150 million; Facebook's status updates duplicate Twitter's main function, and it has a real business in advertising.

But Twitter has raised $20 million in venture capital, and reportedly is raising a new round that values the company, which has $0 million in revenues, at $250 million. That is an infinite price-to-sales ratio.

In the topsy-turvy world of venture capital, that makes sense. Why? It is infinitely easier to tell stories about a company that has no revenues than one that has some revenues. Zero revenues means blue-sky possibility. Any business success charted from here on out will look like a rocket ship, up and to the right.

How dull, by contrast, to talk about a company going from $100 million in sales to $200 million. A mere doubling? Boring! During the dotcom bubble of the '90s, investors punished companies that were making money, because they assumed they weren't investing enough in growth. CNET's then-CEO Halsey Minor once noted this in 1997: "We announced that our revenues were lower, our losses were higher and our stock went up $3. The Internet is its own phenomenon."

That phenomenon now lives in Twitter, whose early investors will surely succeed in getting others to buy into their dream. Simply adorable.

(Photo by Hugh Kretschmer/New York)

In a blog post, Draper, a principal at Draper Fisher Jurvetson, recounted all the political figures he met at the Alfalfa Club over the weekend — Sarah Palin, John McCain, Vernon Jordan, and other "Washington insiders."

Here's his advice to Michelle Obama on how to set herself up as Marie Antoinette 2.0:

I also met Our First Lady, Michelle Obama for the first time, who is charming and stunning in person. I suggested that she go out shopping with her daughters for a press event to get people buying things and getting this economy moving again, and she said, “Great idea. Go tell Barack—go tell the President that.” So I did. He looked across at her and smiled. I think we have a great President.

Also, Draper wants to hire former Florida governor Jeb Bush as a venture capitalist. It sounds like it was a lovely time. Except for all those same insiders who are destroying our country from the inside:

My conclusion there: I think our capital should move out of DC. The people there are too insulated from their country. They become a cancer for the people who come to Washington trying to make a difference. Not many of them made any real connection between our business environment and our economy. Even my limo driver there was trying to get more money out of government, not realizing where that money was actually coming from. The NYC drivers know.

Given Draper's political background, perhaps his lurching between hero-worshipping and backstabbing isn't that surprising. Draper, a Republican, chaired three fundraisers in Silicon Valley for George W. Bush, then declared himself for Barack Obama in 2008. He gave no money to John McCain, but wrote that he was "the nicest man ever" when he met him at the Alfalfa Club event. (McCain must be, for not snubbing Draper after that financial diss!)

Then again, Valley insiders know not to expect consistent behavior from Draper, an excitable sort who's known to strip off his shirt and burst into song to celebrate companies he's funded (as in the clip above). But his bizarre persona likely won't play as well outside the fruits-nuts-and-flakes atmosphere of northern California.

Iceland got in trouble when its banks started offering Crazy-Eddie interest rates to British savers online. When the Brits started worrying about the safety of their money, they staged a run. Unfortunately, not a particularly photogenic one, since it all happened over the Internet!

But Björk, with her pixie looks and penchant for kooky swan dresses, is photogenic. So she may be able to save Iceland by putting a pretty face on the whole affair.

She's not putting much actual money in, actual money being scarce in Iceland. Audur Capital, a venture-capital firm, is raising a new fund named Bjork worth 100 million Icelandic kronur from the singer and the Audur's other investors. That sounds like a lot of money, until you realize that 100 million Icelandic kronur is only $816,330.

How six figures is supposed to bankroll all sorts of new businesses which will replace Iceland's current economy, which is based on Björk, aluminum smelters, and now-defunct online banks, with a panoply of environmentally friendly profit machines, is not explained. But Halla Tomasdottir and Kristin Petursdottir, who have those awesome Icelandic patronyms, say that Björk will offer startups they invest in "emotional capital." Couldn't they get the same benefit by just playing her CDs nonstop?

Oh, also: Petursdottir was the CEO of a British subsidiary of Kaupthing, one of the Icelandic banks which went bankrupt in the whole economic crisis. So maybe this whole scheme isn't such a good idea after all!

BusinessWeek's Spencer Ante got ahold of Digg's financial statements. They are frightful, even for a startup. Last year, the company took in $4.8 million and spent $7.6 million, for a loss of $2.8 million. In the first nine months of this year, losses grew almost as fast as revenues: Digg took in $6.4 million and spent $10.4 million, resulting in a $4 million loss. At an annual clip, that's more than $5 million out the door a year.

Keep in mind that Digg has a lucrative three-year advertising deal with Microsoft, that pays the site a guaranteed rate for its inventory. Without that arrangement, struck last year — driven, most believe, by Microsoft executives' desperation to get in on the Web 2.0 craze — Digg's losses would likely be far worse.

Now it all makes sense: Digg CEO Jay Adelson's repeated attempts to sell the company to News Corp., Current Media, and Google, at a valuation of $300 million or more, came to naught because there's no real business there. Those sales talks, while they were still under discussion, prompted entirely unfounded speculation that founder Kevin Rose was personally worth $60 million on paper. Instead, Digg took $28.7 million in venture capital at a valuation of almost half what the company hoped to sell for.

To be fair, that will last the company years, even at its current rate of red-ink spilling. But it's worth thinking about Digg's numbers amidst the litany of complaints about the ink-on-newsprint business: newspapers coast to coast are seeing devastating declines in advertising revenue. The New York Times has mortgaged its headquarters. The Tribune Company has declared bankruptcy. And yet, even in their decline, newspapers remain prodigious generators of cash. This moribund industry generated $13.7 billion in profit in 2007.

The same cannot be said of Digg, a site conceived by television host Kevin Rose as a replacement for the editors who pick headlines for readers. On Digg, readers vote headlines up by "digging" them, or down by "burying" them.

For now, Digg is safe, insulated from the marketplace as a well-funded private company. But if Adelson no longer plans to sell the company, he will have to take it public. And when the day comes that investors can vote the company's shares up or down, unless he can engineer a dramatic improvement in its finances, he and Rose will know what it feels like to be buried.

It's not like he needs the cash. But we don't think Joy, who joined Kleiner Perkins three years ago, as a partner in the once-storied venture-capital firm which funded Amazon.com and Google, among others, has much time to enjoy the place. Kleiner, like much of the venture-capital business, is struggling, especially with its bets on cleantech which have been battered by both the credit crunch and falling oil prices which make alternative energy sources less profitable. Better to unload it at any price — and invest in real estate closer to the office. As for Jackman, we figure the X-Men star simply knows a bargain when he sees one.

That insider is Adeo Ressi, the lanky, geeky founder of TheFunded.com, a site which lets entrepreneurs rate venture capitalists on everything from smarts to etiquette. (One effect of the site: Entrepreneurs say they no longer see as many VCs rudely pecking away at their BlackBerrys during pitch meetings.) Ressi recently gave a presentation to faculty members at the Harvard Business School. His message: venture capital has crossed a line.

That line is the amount of money venture-backed companies have generated when sold, either to public-market investors in an IPO, or to larger companies in an acquisition. Historically, that has exceeded the amount invested in venture capital by pension funds, college endowments, and other institutions. Put dollars in, get more dollars out: that's the magical money machine that drove a multibillion-dollar boom in venture capital since the mid-'90s. In the first half of this year, that ground to a halt: Venture capitalists raised approximately $22 billion from investors, but their companies only generated $19 billion when sold.

The reasons are many, but they amount to this: Venture capitalists are clubby, insular, and unimaginative, passing up 9 out of 10 deserving companies. And as a result, hundreds of their funds return no money to investors.

If anything, the situation is far worse than Ressi posits; some of the profits from startup sales go to their founders, after all. And a large chunk goes to the VCs themselves, who typically take 3 percent of the money they invest each year as a management fee, and 20 percent of the profits they distribute to investors. One venture capitalist I know estimates that the actual venture-capital deficit — the difference between money invested in funds and money returned — has been running at $6 billion a year for years.

Not all of that goes into VCs' pockets; some of it is simply wasted on businesses which will never turn a profit. But still: $6 billion a year, up in smoke. What is this — the automotive industry? Where's the bailout for venture-capital investors? The truth is they haven't been that outraged, if only because venture capital is such a piddling business for them, compared to their other investments.

Those larger investments are in peril, however, and are jeopardizing VCs' fortunes. Some pension funds are running short on cash, their money locked up in securities they cannot easily sell — and their managers are turning down venture capitalists' requests for more cash. That, in turn, is spilling over to startups, which are being told they cannot raise more money.

The consequence: There will be a slow-motion bloodbath. Slow, because the partnerships which tie venture-capital firms and their investors together are notoriously tricky to unwind; slow, too, because the extent to which VCs' startup portfolios are worth less — or just plain worthless — will take years to unfold.

The problem has been an excess of optimism. To a bullish venture capitalist, every investment looks like it might be the next Google; to a pension fund manager, every VC firm might be the next Kleiner Perkins or Sequoia Capital. That optimism has been turned from liquid cash into illiquid hope, to the tune of billions of dollars.

Bleeding out that hope — finding the deep, despairing bottom — is a process which might take a decade. Ressi thinks that the number of venture-capital firms should drop from 4,800 to 1,000 — while funding a larger number of startups. This will require painful changes in how they do business. But the venture-capital industry has hid its sickness for a long time, making a recovery all the more prolonged.

Ressi will no doubt watch gleefully: He feels VCs mistreated him at his last company, Game Trust. "I will not rest until there is balance in the force," he told The Deal last year. Revenge is a dish best served cold, via PowerPoint.

Ressi's presentation:

The answer is pure self-interest. $4 million is nothing to a 97-year-old venture capital firm like Bessemer. It could easily write off its investment in Wikia, an attempt to capitalize on the anyone-can-edit wiki concept popularized by Wikipedia.

But Levine has invested his reputational capital in Wikia. Admitting he made a mistake in backing Wales means Levine would lose face with Bessemer's partners, who will be more likely to question his subsequent investments. (That he has also invested in Yelp and Diapers.com surely does not burnish his record.)

Levine would have us be impressed by the fact that Wales "volunteered to forgo his Wikia salary." This would be more impressive if Wales had not long ago forgone any pretense of doing any work to earn that salary. When Levine first invested in Wikia, Wales promised to spend 90 percent of his time on Wikia and 10 percent on Wikipedia. In fact, he spent nowhere near that proportion of time on either, focusing instead on an increasingly lucrative speaking career.

I'm inclined to feel sorry for Levine, who was clearly deceived by Wales, but is stuck defending him, lest he admit to the con. We will give Levine this much. In a recent blog post, he wrote, "Valleywag reported some nonsense about Jimmy getting fired because of a bogus expense report. Nothing could be farther from the truth."

What is uncontestably true: Levine was enraged when he learned that Wales tried to get Wikia to reimburse him for a $1,300 dinner with a private-equity investor, at which he primarily discuss ways to profit off of Wikipedia, not Wikia. But it is quite possible that Wales's attempted expense-account flim-flam was the least of his sins as CEO of Wikia, and that Levine actually fired him over more serious matters. If so, why doesn't Levine wash his hands of Wales, write off the investment, and tells us what Wales did? Otherwise, he'll find that he's only just begun his career of lying on Wales's behalf.

The bad news: The company needs the cash. TechCrunch editor Michael Arrington has a detailed estimate of Facebook's expenses:

The company is likely spending well over a $1 million per month on electricity alone, say experts we’ve spoken with. Bandwidth is likely another $500,000 or more per month on top of that. The company has earmarked $100 million to buy 50,000 servers this year and next.... we’ve heard estimates that they may have spent as much as $30 million this year alone with [storage systems company NetApp]. And the icing on the cake — earmark another $15 million per year in office and datacenter rent payments.

And don’t forget those human assets. With 750 employees and growing, Facebook is spending at least another $10 million per month on payroll.

It costs a couple of hundred million dollars a year just to keep the lights on at Facebook. But the real problem is keeping up with growth, particularly storage needs. Add another $100 million or more per year for capital expenditures, and you’ve got a company that’s doing exactly the opposite of printing money.

This estimate, I freely admit, is much better than my back-of-the-envelope math. Arrington may overstate the direness of Facebook's cash position; a $100 million computer-lease deal Yu negotiated has preserved some of its capital, though that will need to be paid off down the road. The company's rosy projections for advertising, certainly, must need to be revised downward.

If Yu has come back from Dubai empty-handed, then Facebook will soon be cutting costs just like the rest of the Valley.

Graham, who sold a company to Yahoo in the '90s, had become microfamous for Y Combinator, which provided both a social club and seed-stage funding. The summer (and winter) camp for young entrepeneurs spun off any number of companies, which then got venture-capital financing, and then a quick exit courtesy of Google or Yahoo's shareholders.

In the bubbly years when Yahoo and Google were snapping up startups freely, Y Combinator's offspring thrived, or appeared to thrive. Got an online PowerPoint clone? Google will buy it! Graham still seems to be living in his someone-will-buy-it dreamland; he recently proposed that companies hire "chief acquisition officers," to specialize in consuming the fare he dishes out. But the giants of the Web have put acquisitions on hold, and few others are stepping up to the plate.

Is Scribd, once described as Graham's "greatest success," in trouble? We don't know that for sure. We do know that hiring 20 people to create software that lets people post PDF documents to the Web always seemed silly. Having a cocky 20something Harvard grad as CEO may work for Facebook, but we don't think Trip Adler is the next Mark Zuckerberg. But Scribd itself isn't the real story. It's whether Paul Graham's magical startup machine is grinding to a halt.

Because, Sequoia partner Jim Goetz says, mobile advertising is potentially a large market, and the startup, he claims, already generates more cash from its operations than it spends. Never mind that Goetz, shown here, was spewing a grow-at-all-costs investment philosophy a year ago; mental flexibility is the hallmark of a venture capitalist.

Goetz's indecisiveness shouldn't matter to AdMob's founder, Omar Hamoui, who didn't need a flip-flopping VC to know he had to run his business like a business. For entrepreneurs more used to spending someone else's money freely, this must all seem a puzzle on the order of a Zen koan: How do you raise venture capital? By not needing it.

Here's what should enrage you as you read it: Unlike the Cyprus trip, this one is ostensibly a work event, paid for by investors and shareholders. (I suppose a handful of entrepreneurs may have bought their own tickets, but in the hopes of paying themselves back by scoring an investment.) What's the agenda for this passel of languorous corporate dealmakers, ebullient entrepreneurs, and phlegmatic venture capitalists? They party. You pay. Later on, they consummate some deals with their pals that they would have struck anyway, crediting the boondoggle junket for "making the connection."

Last year's event was an epic caper, marked by drink-throwing, late-night excursions, and salacious rumors of barside canoodling. Here's whose exploits we're looking forward to reporting, thanks to the moles we've placed throughout Hornik's guest list:

Sequoia, which recently summoned the CEOs of startups it invests in to an emergency meeting and told them to cut costs, is doing the same with its own portfolio. Rather than continuing to invest in the losers, it's culling the herd now. This despite the fact it just raised $1.7 billion in new funds — money that's destined for new ideas, not old ones.

AlwaysOn founder Tony Perkins, my old boss at the Red Herring, has a trenchant analysis of Sequoia's message to entrepreneurs, disguised only thinly as satire. His point, as a longtime observer of Sequoia, is that the venture capital firm's sudden panic is as much about its partners' losing face in front of their investors — the endowments, pension funds, and wealthy individuals from which they raise funds. Appearances matter, now more than ever. And if keeping up appearances means dropping a company? Sequoia's newly hungry partners will do it in a heartbeat.

I hear the company is trying to raise 100mm with Goldman acting as the banker, anyone else hear anything.

First we've heard. Anyone else know if Goldman is out peddling a stake in the company? If true, it must take guts on the parts of Goldman's bankers; as trendy as cleantech is, money-losing startups are not in vogue.