1.  The Venture Capital community has shrunk during the recent downturn.  Jennifer Rossa, Managing Editor of Dow Jones Private Equity Analyst says “Venture fund-raising was driven by substantial closes by industry stalwarts and renewed interest in smaller venture funds. Many limited partners investing in venture believe the industry has finally found a size that can work for it and that proven managers who cap their fund-raising are worth backing.”

2.  Venture Capitalists want significant returns.  Jim Flanagan of Valuelytics says, “Typical time horizon is 5 to 7 years until exit. General rule of thumb is 5-10X return on the money invested. With that you can calculate the IRR and range of values. It’s got to be at 30%+ or it doesn’t work for a VC.”  A little math can help you get a sense of potential valuations.  For example, if you can grow your business to $20 million in 5 to 7 years and sell it at 1.5x sales, that would imply a $30 million sale.  If the investor wants 10x returns, you’re looking at a $3 million valuation today.  Chances are that at a $3 million valuation, you’re raising in the $1 million range.  At that amount, you’ll need to turn to Angels, Seed Funds, Friends & Family, or look your wallet in the mirror.  To raise your valuation, launch your product, get paying customers, and build a clear path to profitability.

3.  Investors need to actualize returns.  In the era of split-second trading, buy-and-hold is out of favor.  For VCs that are investing millions in your startup, they need to actualize returns.  Since your venture is unlikely to return significant cash flows in the early years and the IPO market is relatively quiet despite its recent uptick, the default for an exit is sale via M&A.  Beyond the promise of a sale, there might be other options such as interest and other payments.  Of course, if you’re planning to make interest and other payments, you’re going to need to get to cash flow positive rather quickly.

4.  90% of Zero is Zero.  If your reaction to #2 was “my business is worth more,” then read on.  Too often entrepreneurs have inflated sense of valuation or are unwilling to give up singificant parts of their company.  There are many startups that need investment, so if you aim too high, you may struggle to raise money for a cash starved business with stalling momentum.  Just remember that you can own 90% of an idea, but if you are unable to achieve revenue and profitability, your idea and business might be worth nothing.  Of course entrepreneurs should seek the best terms possible, and ideally hold onto control through the early phases of growth.  However you must realize, it’s usually better to have 49% of a $10 million business than controlling stake of a $0 million dream.

5.  As you can see, today there is an intense focus on driving revenues and cash flows.  You might have grand plans of creating an empire, a comprehensive solution to market problems.  Today’s environment demands that you make tangible progress one step at a time.  Can you break up the market problem into smaller sets of addressable opportunities?  Condense the time to market and become comfortable with a Beta approach of continual product upgrades.  Recently, a startup wanted to raise $20 million for a series of related projects that provided great synergy.  After 60 days of investor conversations, that same startup is raising $2 million for the most promising and near-term achievable of the projects.

6.  This leads me to my next point.  Fundraising can take a lot of time.  I’ve seen too many entrepreneurs with unrealistic fundraising goals (trying to raise too much at a high valuation without demonstrated market progress).  What happens?  6 months of unsuccessful fundraising later, and they’re back to the drawing board.  Save yourself the 6 months, and get realistic from the start.  Better to focus 6 months of your time making progress on the business than talking to investors who say no.

7.  Where to spend that time?  Talk to customers and partners.  The only way to make money is to bring in revenue.  Since you’re going to get your revenue from customers … spend your time networking with, interviewing, research, and selling to customers.  If you’re lucky, you might be able to get early customers by offering discounts and the ability for them to shape the product.  Even if you don’t land a customer, you’ll likely gain a lot of market intelligence that will make the ultimate product better.

8.  Many startups will seek to break the $1 million revenue threshold within 2 years.  That’s not an easy task.  I recently met with a startup that spent 1 year just in conceiving their product idea.  They went through 5 iterations that were ultimately scrapped before confidently greenlighting product development.  That product then took 9 months to develop.  That’s 21 months from beginning to actual product launch.  Fortunately, the entrepreneurs had other jobs and projects which provided the cash flow.  They redirected their earnings to this initiative along with $100,000 from friends & family.  They still have some money to market launch the product.  Get a head start on your venture by starting at night and weekends and redirecting earnings to make progress while gainfully employed.  If you think you’re ready to quit, try working your day job another 3 to 6 months.  The longer you make progress at night, the better your lift-off will be.  Line up self-funding, friends & family, and angel funding to take you as close to the $1 million revenue milestone as possible.

Startup economics have changed dramatically over the past 10 years.  But don’t be discouraged.  There are still major successes such as Groupon which announced a $1.35 billion valuation in its April 2010 round of fundraising.  Build your network and call in favors as you strive for ambitious goals in a difficult startup economy.

Image by jaylopez from Stock.Xchng

Photo by Iain Gordon, from Magdalen Green

By Ethan Lyon, Senior Writer

In recent years, a new breed of venture capital firms has emerged to make an impact beyond just profitability. Social venture capital funds are adding a new mission in combination with positive financial returns: social and environmental impact. Highlighting social venture funds across the world, this week’s top five will focus on VC portfolios that range from organic beverages to water purification systems in Rajasthan to fiber optic enterprises making energy companies more efficient.

1. The Acumen Fund

With the mission of reducing world poverty, the New York City-based venture capital fund invests in enterprises that improve the lives of those in developing nations. With branches in India, Kenya and Pakistan, the Acumen Fund has global reach and supports entrepreneurs through its vast network. The unique characteristic of the Acumen Fund is they are non-profit. They take an entrepreneurial approach to solving poverty by way of support programs that focus on health, water, housing and energy. Through their innovative, entrepreneurial approach, they can build a solid business framework to combat widespread poverty in developing nations. Aqua-Aero Water System is an Acumen Fund-sponsored company that recently provided drinking water for remote, arid regions of Rajasthan.

2. Good Capital

This San Francisco-based VC firm invests in social enterprises that create social equity. In essence, they are the bridge between philanthropy and traditional investing. Highlights of their portfolio include Adina’s World Beat Beverages, a fair trade and organic beverage provider that gathers flavors from around the world to create “drink no evil” beverages. In addition to their social entrepreneurs, Good Capital has numerous projects to support education, financial support and engagement, such as their involvement in SoCap—a conference for social enterprises to share and build relationships with like-minded entrepreneurs and VC firms.

3. Underdog Ventures

Bridging philanthropy and profitable enterprise, this Vermont-based venture capital firm is heavily invested and wildly passionate about socially responsible investing. The key element that differentiates Underdog Ventures from other social venture funds is investors can choose where to allocated their investment based on Underdogs core passions: natural and organic food, environment and conservation, socially responsible consumer products, and socially responsible investment companies.

4. Clean Technology Venture Capital

This eco-focused VC firm, with offices in New York and San Francisco, invests in mid-sized alternative energy companies with promising exits. The eco-VC firm investment matches the current revenue of prospective companies, which is approximately between $2-7 million. With over 100 years in clean technology, private equity and entrepreneurial experience, Clean Technology Venture Capital aims for a $30-100 million exit in 3-5 years. Their portfolio has an array of companies that contribute to a sustainable future in a unique way. SensorTran improves efficiency of energy providers across traditional and alternative energy companies through enhanced fiber optic cables.

5. Community Development Venture Capital Alliance (CDVCA)

This network of like-minded social ventures aims to educate, support and promote investing in businesses focused on social development. This New York City-based alliance manages its own investment vehicle, called the Central Fund. Through conferences and workshops, the CDVCA seeks to gather social investors and share industry insights. Unlike a typical venture capital firm, the alliance brings together many prospective and established venture capital firms with a focus on long-term sustainability to create impact from the top down.

By Ethan Lyon, Senior Writer

If there’s any indicator of how influential social entrepreneurship has become, take notice of the several hundred eco-capitalists in attendance at SOCAP—a conference where business and social responsibility intersect. The rising trend in impact investing has accelerated in recent years. The pool of socially responsible investment dollars in the United States has now grown to $2.34 trillion and the second quarter of this year has seen a 12% increase in clean tech investment, a $1.2 billion upswing.

Though social capitalists are seeing significantly less profits, for them, impact overshadows profitability. As social ventures operate under business plans and financial models, they do need to turn a profit, but revenue expectations are much lower—as social endeavors take more center-stage.

“Many socially responsible investors are under the impression that there needs to be a tradeoff between social impact and financial returns. We believe it’s possible to have both and tradeoff is not always necessary,” said Josh Cohen, managing partner at the VC firm City Light Capital. City Light Capital focuses on early stage, social mission-driven companies with promising financial returns. Their foremost objective is investing with impact. The eco-venture has secured two exits and has interests in an array of social enterprises, from media to education to robotics and surveillance.

Underdog Ventures, a social venture fund, notes conventional VC funding seeks to protect the rights of the private shareholder, while social venture funds prioritize investor values to elevate the welfare of all stakeholders. That means all those involved, from the beneficiaries to investors, are funded based on value and impact. Venture capital firms can influence and hold their portfolio companies accountable through investment dollars.

City Light Capital is amongst many venture capital firms funding and influencing the new business model—one in which social compassion, accountability and profitability intersect to create impact. “Much like cleantech five years ago, impact investing is a hot topic and we see a lot of social entrepreneurship programs developing in business schools,” Cohen said.

As Cohen notes, there is a new generation of entrepreneurs coming out of business school with a different perspective than those that came before them. With a strong influence to create a long-term impact, social entrepreneurship will emerge as a profitable, important sector for venture capitalists.

As venture capital continues to support cause-driven companies, entrepreneurs have an opportunity to be profitable and create long-term sustainability. Where at one time cause-driven businesses found it challenging to find investment, if the trend continues, social entrepreneurship will take center-stage and potentially be the gold standard of the investing world.

Photo by Riyas Hamza from Stock.Xchng

By Ethan Lyon, Senior Writer

As entrepreneurs and industry leaders adapt to the digital world, innovation is central to success. To illustrate innovation and entrepreneurship in the tech sector, we’ve selected ten companies across five categories that have secured venture capital (VC) investment. These companies are pioneering innovation and leading the next evolution in e-commerce, marketing, online video, social media and mobile technology:

1. e-Commerce

Twitter mashups are everywhere. Social media juggernaut, Facebook hosts forums that combine online video streams and real-time discussion. Established and emerging entrepreneurs are constantly creating mashup platforms in an effort to engage new audiences. Integration and convergence are re-shaping the way we interact and engage in online shopping and social activities.

oneTXT, which received $2 million in series A venture capital investment from KPG Ventures, is integrating e-commerce with social networks, participation TV shows and online games. With social shopping sites like Snipi, entrepreneurs are trying to incorporate e-commerce in new ways–that go beyond traditional e-commerce sites like Amazon. Bridgevine, a shopping engine, just received $3.5 million in series C round of venture capital investment from Constellation Ventures and Safeguard Scientifics. Mashups are key as entrepreneurs pioneer the next era in e-commerce.

2. Marketing

Mobile and in-house marketing are two—of the many—strategies leading the next frontier of digital advertising. ClickFuel, which landed $2.5 million in its first round of institutional VC funding, provides business owners tools to run their own search marketing campaigns. Search optimization tools such as those provided by ClickFuel will help business owners seeking to boost their online presence and leverage in-house employees.

AdWhirl has capitalized on the popularity of smart phones to offer advertisers a high-impact delivery system for iPhone apps and other 2G and 3G mobile devices. AdWhirl has secured $1 million in early VC funding, led by Foundation Capital.

3. Video

Online video is growing by leaps and bounds. Video consumption is expected to account for more than half of all internet traffic by 2012. Expect online video to increase in quality (e.g. YouTube now offers HD video) and delivery and management systems to add some organization to users video libraries. Nokeena, which secured $6.5 million in its second round of institutional VC investment from the Mayfield Fund, offers providers storage for high-quality video and video monetization opportunities. To manage video libraries, Grab Networks has developed an “end-to-end, automated platform” for users. Grab Networks has secured $12 million in venture equity and debt financing—led by Horizon Technology Finance.

4. Social Media

Bebo, DeviantArt, Friendster, Gather, MySpace, LinkedIn, etc, and the list goes on. Seemingly endless social networks have sprung up to gather and engage niche online communities. Often times, internet users have two, three or ten or more profiles on various social sites. To find connectedness amongst various social networks, Collecta, securing $1.85 million in VC funding, is a search engine that monitors streams of popular sites, blogs and social media. In essence it’s a digital manager—important in a world with endless RSS feeds and millions of community members.

Google Wave has garnered much attention not only because it is a Google product, but because it revolutionizes the way we view our inbox. Cc:Betty, securing $1.5 million in VC financing by Venrock, follows similar thinking in that they provide users an e-mail assistant to facilitate collaboration and aggregate like-minded users into communities.

5. Mobile

We are spending more and more time with our phones. As smart phones increase in popularity, a mobile phone is not just a phone. It’s a GPS, gateway to all social networks, internet connection and BOKU envisions it to be payment tool. BOKU, which has secured $13 million in institutional VC funding from Benchmark Capital, seeks to make online payments easier from a mobile device.

If you are smooth-sailing company, with the wind behind your cashflows, you have control over where you’re going. But, if you don’t have the wind on your side, you’re going to need the help of someone else.

Debt can be a reliable source of financing if your business is headed in the right direction (steady cashflows and no waver in sight) and you can easily pay-off any accrued debt. But if you’re in a less predictable business with higher growth curves, you might want to consider the alternative, equity financing:

Here are some questions you should ask yourself before you decide to pursue equity financing:

Are you a rising star or a cash cow?

Though you might want to keep going in the same direction as you always have, if you want to make a leap, you might need expansion capital.  Can you bring your business to the next level by making some minor adjustments? Be realistic. If you’re not a cash cow, it might take a significant cash infusion.

What stage in the business cycle are you?

1. Early Stage
If you’re just gaining market traction with your business and you have a plan to take the next step, then you can pursue angel investors. They invest in early leaders and could be the financial backing to help you attain a higher calling.

2. Established Stage
You’ve been in business for quite a while, but you don’t have the cash flows to leap ahead of the big boys. If your business still shows promise and has success potential, try a venture capital firm. They invest in early and later-stage companies. They have the deep pockets your business needs to take on established leaders.

Are you willing to lose complete control?

Before going to an angel investor or venture capital firm, consider how much you value control in your enterprise. Are you the entrepreneur that will not allow any part of your pie eaten or can you see the power of giving away a slice of a bigger pie? Determine how much company control you are willing to give up. Be careful not to sell yourself out trying to advance your business.

If you decide you control your company and no one else can share the helm, you might find yourself without a paddle: stuck in the middle of nowhere with not a grain of sand in sight. This strategy might be a bit short-sighted. Equity financing can be a very beneficial strategy to help your business achieve more. By involving venture capitalists and angel investors into your endeavor, though you are giving up some control, you are sharing the risk–thus sharing the passion to succeed.  With deeper pockets, you can grow into a more formidable market player.

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Investments With Wings

By Ethan Lyon, Senior Writer

You may think of venture capitalists as just a source of funds.  And, yes, they do hold the keys to millions of dollars that can help you achieve your business goals.  But they are more than a source of funds.  They are a partner that is going to be with you in good times and bad times.  Sometimes a great partner, and sometimes a partner that you’d rather not have.  So you must find a venture firm  that is aligned with you and your company’s goals.

If you knock on every VC door, you are going to be wasting your time as well as theirs. Look at the list of companies the VC firm has invested in and see if you could be on that list. It’s important to know what to expect before going to a VC firm. Here are some points of review before you knock on that door:

Six Points to Finding the Right VC Firm

1. Start-up or Established
All VC firms want to see that you have successfully taken on risk.  Some will prefer that you have made significant progress and just need a small financial boost to take your company to the next level. Others will be more willing to invest in the initial stages of your business.

2. Internet or Manufacturing
It is important to keep in mind that VC firms can specialize in a certain sector. Before you even make that call or send that e-mail, make sure that they have a history of investing in your sector. If you are an Internet start-up it doesn’t make sense to go to a manufacturing VC firm.

3. $1 million or $10 million
Before you seek out an investor, do your homework and figure out approximately how much you need to raise.  You need to be prepared when you are asked “How much?” Once you answered this question, it will help you focus on VC firms that concentrate in the range you seek.

4. Southwest or Northeast
While some VC firms have global operations, many VC firms have a regional focus.  If you have the next big idea, you can open global or local doors.  For most entrepreneurs it makes more sense to start in your region.  Get connected locally and then branch out.

5. 10% or 100%
The return on investment varies within the investor community. Investors have differing expectations on the return of their investment. Some seek safer investments and are willing to accept lower returns.  Others are looking for homeruns and grandslams.  Find the firm with the risk / reward philosophy that matches to your business.

6. Hands on or Laissez Faire
The nature of equity necessitates the involvement of another party. However, some investors want more or less control for the same capital. It is important to understand the role the VC firm plays in the decision-making process of each investment. It might be difficult for you, the creator and father of your idea, to have an investor heavily influence your business decisions.

Looking Forward

“We expect to see further declines in the short term performance numbers into 2009 until the exit markets improve,” said Mark Heesen, president of the NVCA.  “Longer term performance will hold steady for the time being, but a prolonged capital markets crisis will begin to impact these numbers ultimately as well.”As Heesen noted, VC firms are drawing back–absorbing the shockwave of the recession. That means the investments have receded and it is more difficult to get funding. However, there are companies seeing VC dollars confidence.

As we noted in our Top 5: February Funding post, entrepreneurs are challenged to create innovative businesses that will shape tomorrow. If your company can create meaningful impact for customers, you still have a chance at being that small fraction of entrepreneurs to gain VC confidence.

By Ethan Lyon, Senior Writer

In today’s business environment, we need someone to look after us. Bad things are happening everywhere. And the climate is volatile–with winds that can knock down the Dow 381 points one day and up 379 another day. The future is uncertain and no one has a crystal ball. But angels can be your guardian–to guide you, through funding and real-world experience–to make your business future more secure.

Spin

Angel investors can be a valuable asset to your start-up business that provide funding to get your business off the ground. For early stage companies, angels may be a better alternative to venture capital firms because Angels may be more willing to fund early growth with sums of money in the $25-50k range but can go to the million dollar mark.  This is in contrast to venture capital firms who typically invest in rounds of at least $2 to $3 million in companies that have demonstrated progress or show promise.

Often, early stage companies will arrange for several angel investors to fund their early development.  As you select your Angels, consider how they plan to be involved.  Some angels may add value in the form of contacts and advice while others may micro-manage and actually drain resources from the company.  Consider that while you might need funding badly, you could end up with an investor that is going to make the next five years of your life a living hell.

Law of Attraction

Types of Angels

There are many different types of angel investors. We’ve highlighted the top three:

Riding the Comet
With investing, there are leaders and there are followers. Let’s say Warren Buffet wanted to invest in your business. You better believe that his involvement, even at $100k, would generate the buzz necessary to line-up investors with wallets open. This is called the celebrity effect. These celebrity investors know that they are a stamp of approval and may expect better terms than your run-of-the-mill angel. Their expectations will range from board seats to higher equity stakes and other special treatment. In many cases, it is worth it.

Making the Connection
Investors that are well connected are a valuable asset to have on the team. Well-connected angels can be a starting point when organizing your team. They have an extended list of contacts that can lead to more funding, experts, customers, publicity, and more. Consider them a gateway to future opportunities.

Power by Numbers
Another strategy is to attract significant interest from many parties.  It’s always better to generate too much demand from angels.  You’ll have more control in setting terms and will have more choice on selecting those angels that will add the most value.  With a larger pool of angels invested in your company, you will have more potential sources of funding should you require additional capital.  On the other hand, you will also have more people questioning your progress.

Finding Angel Investors
Angel investors are often organized in local, regional or national networks. Depending on the type of business, some angels are more appropriate to target over others. For example, if your business is a café, a local angel might be the way to go. However, if your plans are much larger, such as a new coal technology, you might want to contact angels in a national network.

Looking Towards the Future

Angel investing isn’t going anywhere. There is still opportunity in angel investing. Whatever you might think about investing, businesses will still be born, even while they might be dropping like flies. Some companies will be born from the crisis, others will wade through it. Whatever the result, there will be angel networks to go to for that first round or second round of funding, so when you have the breakthrough idea, someone will give you the ability to take off.

By Ethan Lyon, Senior Writer

While your dream may be to meet that VC firm with deep pockets, the reality is only 0.1% of businesses realize that opportunity. That’s why you need to be your first line of financing. Put your money where your mouth is and finance your business with personal funds. Remember, you are your greatest advocate.

It’s risky. But as we’ll outline in this post, risk can be a good thing. Actually, the more risk you take might help you later down the line when you decide to knock on the VC or angel investors door. Let’s start with the implications of financing yourself.

Spin: The Drawing Board

Before you begin to finance your business with personal funds, consider the risks. If your business fails, are you going to accept the possibility of such a financial loss? Stable personal finances while in the preliminary stages of your business development will help you can absorb any losses.  A great way to start a business is to moonlight on your new business while fully employed and collecting a paycheck.

Entrepreneur.com compares the concept stage of your business to an unhatched egg. The incubation process can be expensive. Do your upfront market research and planning while you are getting paid.  Figure out how much time and money it is going to take to start your business. Get honest about your finances before entering into a business endeavor so that you are prepared for challenges along the way.  Many businesses fail because they don’t have adequate funding for unforeseen delays or setbacks.

Our team recently met with an entrepreneur with a compelling idea.  But he was completely unprepared financially.  He was putting consultants on credit cards with the hope of getting investors to pay them off later.  This is not the best idea.  You don’t want to go into a financial tailspin trying to start your business or keeping it afloat.

How to Self-Finance
Before you go to a venture capitalist or an angel investor, make some progress on your own. Can you fund initial startup costs?  Can you tap into friends and family for help?

“Hello Uncle Larry, remember me…”
Friends and family are a great place to start. You might not need to seek additional investors if you can fund your business through established relationships. Consider the consequences of borrowing from family and friends. If your business fails, are you financially obligated to pay those from whom you borrowed?  Even if you are not obligated, will you destroy relationships?  Contracts might be your solution to relationship-ruining borrowing practices. Outline terms of agreement before borrowing and identify potential outcomes (including the scenario where they lose all their money).

Other avenues of fundraising by yourself
There are alternatives to funding your business through family and friends. Though the risks might be much higher, you can sell assets, borrow against your home, take out credit cars, tap into your IRA funds or borrow against your 401(k). These are very risky and might land you in serious financial straits. It is best to avoid financing in this way because you could lose everything very quickly if your business doesn’t become an immediate success.

Benefits of Risk
Venture capital firms and angel investors are interested in your business proposition, as well as the decisions you’ve made along the way. The more smart and successful risks you have taken to get to the venture capital firm, angel investor or bank, the more they will take your business seriously.

On the one hand, a second mortgage and credit cards show that you have a lot on the line if your business fails. This ensures that you are going to do everything in your power to not only keep the business afloat, but make it successful.  On the other hand, be careful not to put yourself in a personally disasterous financial situation as this will raise red flags about your financial management capabilities.

Looking Forward

According to the Small Business Administration, 66.6% of small businesses survive at least two years and 44% pass the four year mark. Those odds are not there to discourage you. They are there to make you think long and hard about financing your business. You need to understand the risks of your endeavour before taking the plunge. Additionally, in todays business environment startups have a more difficult challenge. But there are opportunities born from crisis. Use the market to your advantange and be a part of the 44%.

By Ethan Lyon, Senior Writer

The investor presentation is one of the single-most important pitches to an investor. If you have an opportunity to give an investor presentation, it’s crucial to make your presentation polished, clean and memorable. Venture capital firms may see hundreds of presentations before selecting only a few to invest in. There are several key components to a powerful, yet comprehensive presentation.

The Powerful PowerPoint: Where Interesting Meets Informative

Be Concise
Avoid text-heavy slides. They distract the audience from what you’re trying to say. Simply write the core of your talking points on the slide, not the entire business plan.

Be Visual
The more visual and design-friendly your slides, the more interesting they become. If all of your slides are text, the presentation might seem boring and tedious. While charts are great, make sure they tell the story.  Clipart for the sake of having clipart might make your presentation look cheap and corny.

Be Short but Compelling
Play to a short attention span. Assume everyone in the room is not as invested as you are, how are you going to capture their attention. Having 50 slides is not compelling. Think less is more.

Example:
In the mid-80s, Jerry Kaplan was a young entrepreneur in his late 20s. His vision was to create a personal computer that could fit in a briefcase. He had a chance of a lifetime when he was asked to present his venture to Kleiner Perkins—a celebrity venture capital firm in Silicon Valley.

Partially finished with his presentation and unsatisfied with his performance, Kaplan gave up. He made the decision that his presentation was boring and he wasn’t going to get any investment from Perkins anyway, so he did something that someone in their right mind would not expect or do. He remembered his goal: computer the size of a briefcase. In a fateful turn of events, he threw his briefcase on the table and said, I want to make a computer that can fit in that. The investors, surprised by this unorthodox turn of events, leaned forward and began to talk. After some questions and discussion amongst the audience, Kaplan left. But he left with a $4.5 million investment in a non-existent company.

Be Realistic
Just as you would demonstrate a strong market, show that there are barriers. Honesty is paramount. Make sure there aren’t negative surprises when an investor is interested in your business.

Be Focused
The presentation is a concise version of the business plan, so make sure you hit all of your bases. Make sure you capitalize on the financials, the current trends in the market and who is going to be running the business.

Think Sales
In that meeting, you’re a salesperson. Think about what you would you do if you were trying to sell any other product. You may not close in the meeting, but be sure that you have a gameplan to continue the conversation.  Leave a small take-away about your company so you have a physical presence after you leave.

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By Ethan Lyon, Senior Writer

In a world where the Dow has fallen into a pit of quicksand, what business could be getting funding? A dog-lovers virtual village and a photo shopping application aren’t the first picks that come to mind. We’ve selected some of the most interesting out-of-the-box startups receiving VC funding in the month of February. [singlepic id=79 w=320 h=240 float=right]

Here is list of companies getting the greenlight for take-off:

1. Pixazza–Shopping through photos–that’s what Pixazza is all about. Fashion mavens find the clothing worn in your site’s photos and link it to online shopping websites like Amazon, Bluefly and Zappos, where consumers can then buy the item. Providers and Pixazza then gleam a commission if the customer chooses to buy the item. Click here to see a demo. Pixazza received $3.1 million in first venture capital funding from undisclosed investors

2. FetchDog–There are social networks for nearly everything–speakers, virtual eco-worlds, golfers, Twittering moms and nearly everything else under the sun. FetchDog begs the obvious: think dog-lovers social networking. This is a thoughtful, user-friendly community and marketplace where dog aficionados can meet, shop and pour over everything canine. FetchDog received a whopping $4 million in venture capital funding from Borealis Venture and others.

3. Cake Financial–Wrapping all of your investments into a neat software package is nothing new. Cake Financial is doing just that but adding impact and value through a highly visual analysis and comprehensive projections. Consider it the Apple of portfolio management software. Users can also chat with others in a community of experts. Cake Financial received $1.26 million in its first round of venture capital funding from Alsop Louie Partners and KPG Ventures.

4. Mochila–This is an online marketplace for content providers, creators, editors and advertisers to find one another and build relationships. Mochila has an extensive library of syndicated web content that partners with advertisers to reach a targeted demographic. Mochila received an undisclosed amount of venture capital funding from Charles River Ventures, Mission Ventures and others for their first round of investing.

5. Outright–For startups and small businesses, bootstrapping is the current credo. That’s why Outright is offering their bookkeeping software for free. Formerly GoBootStrap, Outright is still in beta, but will soon charge users for an advanced version that will include features like additional tax forms, multi-user access as well as add-on services for filing, payroll, and the likes. Outright received $2 million in venture capital funding from First Round Capital and Shasta Ventures, with additional investments from Jeff Clavier’s SoftTech VC and a number of undisclosed angel investors.

What are the common threads of these startups that successfully garnered VC confidence?  A focus on money and passion points.  Mochila and Pixazza help you make money.  Outright and Cake Financial help you manage your money.  And Fetchdog plays on our love for pets.  The current financial free-fall has changed the market and made it more difficult for businesses to raide money.  We are challenged to be both more creative and more practical in developing businesses that will be profitable today and tomorrow.

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