October 2, 2000 E-Business: Starting Gate Lisa Bransten B19 [What's New in Venture Capital] Focus like a... DIG DOWN a little ways in the frenzy over investing in optical-networking equipment and you will find that a particularly interesting subset of that sector involves "tunable lasers." Lasers are needed to transmit light beams over fiber-optic lines in optical networks. Tunable lasers, in turn, allow more flexibility in a network because one laser can handle a number of different wavelengths of light. Without tunable lasers, networks need separate lasers for each wavelength of light they carry. Also, the devices allow network operators to more easily ensure redundancy in their systems because instead of having to have a separate backup laser for each device in the system, one tunable laser can be set to replace any laser that goes down. Driving up interest in the sector was Nortel Networks' acquisition of tunable-laser company CoreTek for more than $1 billion. A new company in the field to get funding is year-old Agility Communications, Santa Barbara, Calif., which has just closed on a $70 million investment round led by Worldview Technology Partners. Agility's technology is based on research by Larry Coldren, a professor at the University of California at Santa Barbara who serves as the company's chief technical officer and chairman. Agility will face competition from big players such as Nortel and a rash of start-ups. But the market for tunable lasers is expected to be big. While it is only about $100 million this year, market-research firm ElectroniCast figures it will grow to $1.4 billion by 2005. A Good Choice THE PROBLEM with most economists is that whenever they set out to answer a question they start with the phrase: "holding all other things constant." In the real world, of course, none of those variables are constant. Now, a new company -- one co-founded by an economist at that -- aims to help people deal with many of those variables. Liquid Engines, of San Jose, Calif., has seed funding of $1 million from Catamount Ventures and Oak Hill Venture Partners to develop a search engine that delivers results based on user preferences. The software -- based on complex algorithms written by company co-founder Edward Lazear, a professor of economics at Stanford University's Graduate School of Business -- is designed to deal with the complex issue of how to get accurate search results from a "fuzzy" query. The company's search-engine software allows users to enter criteria they want in a product or service and then rank how important those criteria are, the way one might describe the perfect job to a recruiter. Pay might be important, but a person might settle for less if it were 10 to 20 miles from home, but not if it were 40 miles away. In fact, a target customer for Liquid Engines might be an online recruiting company, or even a traditional one that wanted to use the software to help recruiters more easily match employees and employers. Location, Location, Location FOR THE PAST 16 years Raman Khanna has been hanging out near the epicenter of new-technology creation as chief information officer for Stanford University, helping several entrepreneurs get businesses off the ground. Now he is trying to parlay that experience into a new career as a venture capitalist. He and partner David Lane, formerly a partner at venture firm Alpine Technology Ventures, Cupertino, Calif., have raised $130 million to invest in technology companies. The company is in Cupertino for now, but the duo say they are planning to move into offices on exclusive Sand Hill Road. It isn't clear that helping Stanford set up its telecommunications infrastructure translates into the ability to judge what companies will succeed in big markets, but Mr. Khanna has amassed a number of big-name advisers for his small fund. For example, Vint Cerf, a senior vice president for Internet architecture and technology at WorldCom and one of the fathers of the Internet, agreed to serve as an adviser. Others include Joseph Goodman, a professor emeritus of electrical engineering at Stanford and Michael Spence, former dean of Stanford's business school. Seedlings: ADAM GROSSER, formerly president of the subscriber-networks business at Excite At Home, is joining Palo Alto, Calif., venture firm Foundation Capital. Including Mr. Grosser, Foundation has seven general partners . . . . RealCall, a London company with technology that can deliver wireless alerts to mobile telephones, hand-held devices and interactive televisions said it raised $40 million in a round led by Deutsche Bank Venture Partners.