Earlier today, I noted how venture capitalists are struggling to find positive returns in this tough economy. But it’s not just the VCs that are hurting.

Amazon.com today said that the value of its investments in private companies fell to $89 million in the first quarter, down from $247 million at the end of last September. That’s a whopping 64 percent decrease in six months. The online retailer has been one of the more active investors in new Internet startups in recent years, taking stakes in companies such as Yieldex, Wikia, Elastra and Engine Yard.

Earlier this month, Amazon invested in Seattle online recipe site Foodista and San Francisco startup BookTour.

But just like venture capitalists, Amazon is having a hard time figuring out what value to place on startup companies these days.

"The current global economic climate provides additional uncertainty," the company wrote in today’s SEC filing. "Valuations of private companies are inherently more difficult due to the lack of readily available market data. As such, we believe that market sensitivities are not practicable."

Amazon.com was burned badly during the last downturn because of its invesments in failed Internet companies like HomeGrocer.com, Kozmo.com and Living.com.

However, there’s a big difference this time around. Unlike the multi-million dollar bets at the turn of the last decade, Amazon is now putting far less capital to work in individual deals. For example, both Foodista and BookTour raised less than $600,000.

If the startup companies are unsuccessful, the giant online retailer should be able to stomach those types of losses. However, no matter how small the loss, investors may begin to question why Amazon.com continues to bankroll these money-losing ventures.

[Story via paidContent.org]

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and Microsoft’s Mundie, Google’s Schmidt named Obama advisers  

Craig Mundie, Microsoft’s chief research and strategy officer, was among 20 science and technology leaders appointed this morning to President Obama’s Council of Advisors on Science and Technology. Also on the list is Eric Schmidt, Google’s chief executive.

It’s probably no coincidence that the administration picked representatives of both Microsoft and Google to serve on the council. Given the rivalry between the companies, and the possibility of future regulatory battles, excluding one could have stirred suspicions of bias.

Overall, it’s a very brainy group, with expertise in areas including climate change, medicine, physics, chemistry, computational biochemistry and computer science. The White House says the group will advise Obama "in the many areas where understanding of science, technology, and innovation is key to strengthening our economy and forming policy that works for the American people."

Mundie is charged with overseeing Microsoft’s long-term research and strategy. He and Ray Ozzie, Microsoft’s chief software architect, are filling the primary roles held by Bill Gates before the Microsoft chairman ended his day-to-day duties at the company last year.

In a statement released by the company, Mundie said he was honored by the appointment. The group, known as PCAST, was established by President George H.W. Bush in 1990, the company noted.

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and Venture returns slump  

Venture capitalists continue to outperform the Nasdaq and the S&P 500. However, venture returns fell last quarter as the exit markets dried up, according to a report released today from Thomson Reuters and the National Venture Capital Association. Taking the biggest hit was one year returns, which came in at negative 20.9 percent for the quarter ended December 31.

That compares to negative 2.1 percent for the previous quarter. Three year, five year and 10-year returns also took a hit. Five year returns, for example, came in at 6.4 percent across all venture classes. That compares to 8.4 percent for the previous quarter.

The report indicates bad news ahead for venture capitalists, who rely on companies going public or getting acquired in order to make money. Both the IPO and M&A markets have slowed considerably in the past 12 months, causing concern for VCs. 

Given that the report lags by one quarter, it is likely the returns will decline further later this year.

The only bright spot is that public markets are faring much worse. The Nasdaq’s one return was a negative 38 percent, while the S&P 500 was down 36 percent for the same period.

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