?Page views? no longer get you in door with VC

Obtaining venture capital isn’t what it used to be. With Wall Street in a prolonged slump and the nation mired in an economic downturn, venture investors have had to shift their priorities when it comes to evaluating potential investments. In essence, they’ve gone back to the basics: a solid business plan, proven market potential and a clear path to profitability.

Gone are the days when the number of clicks, click-throughs or page views are

enough for budding entrepreneurs to attract millions. Today, venture firms are much more careful in choosing their investments, thanks in large part to the spectacular non-returns created by so many dot-coms. There are so many ways this measured approach reveals itself. From the entrepreneur to the product to the market, venture firms are returning to the basics for making investment decisions.

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Whereas venture investors previously were attracted to young companies with unproven entrepreneurs, today they’re more likely to look for entrepreneurial experience and a single visionary closely involved in the development of the technology. They’re turned off by entrepreneurs looking for a quick road to riches and instead are looking for those with the passion to navigate the ups and downs of running a start-up. Moreover, venture capital seekers should have the flexibility to know when it’s time to step aside and let a professional executive take over for the good of the company.

Being a bankable visionary in these times also means having focus. Having watched their portfolios take a consistent beating in recent months, venture firms aren’t interested in companies trying to address a variety of markets with multiple products. A product that’s foreseen to have multiple potential markets is fine, but it should emerge from a singularly focused initiative.

Perhaps the most significant change among venture firms is the growing requirement that young companies have a sales track record before seeking funding. It’s no longer enough to have a technology that’s practical. It’s also no longer enough to offer research indicating market demand.

Today, hard sales figures are a key component of a successful venture pitch. For that reason, entrepreneurs seeking early-stage capital to help generate those initial sales first should turn to their own resources, family and friends or an angel network. (Apparently they are. A recent Angel Advisor magazine survey found that the number companies funded by angel groups grew 236 percent between 1996 and 2000.)

Despite the new emphasis on track records, venture firms still consider market research and market size important. Entrepreneurs must demonstrate that their target market is substantial and likely to grow. How a company plans to address that market is crucial. Will it focus on a single vertical niche, or will it address several? Developing a horizontal approach without establishing a game plan for each vertical market isn’t a strategy; it’s the low-hanging-fruit approach, which rarely ink’s a venture firm’s checkbook.

When defining its market, it’s key for a young company to be realistic. Entrepreneurs shouldn’t over-hype their product’s potential and should actually

identify the potential risks in executing their strategy.

They also should seek out and clearly identify their competition. Claiming that there is none may indicate, more than anything else, that the market opportunity is too small to garner much interest.

In eyeing possible exit strategies, entrepreneurs should be aware that a stated goal of putting together an IPO within 12-18 months is no longer realistic. A longer-term approach is required today. This is one reason focus and passion are desirable attributes among venture investors.

Of course, all of this is rendered moot if an entrepreneur can’t get in to see a venture capitalist. And with so many young companies seeking capital, getting time with VCs is more challenging than ever.

The most reliable path into a venture firm is through referrals, particularly from other entrepreneurs already in a firm’s portfolio. If that direct route isn’t available, try to attract industry luminaries as advisors to the company’s board of directors as they may be able to make valuable introductions. In addition, look to establish ties with well-connected banks and law firms that have a similar industry focus.

Once in, it’s crucial that an entrepreneur establish credibility with a venture firm. In other words, leave the non-disclosure agreements at the office. Nothing indicates naivete in the venture world like asking would-be investors to sign NDAs. If a business plan is written as it should be ? offering the sizzle, but not the steak ? this shouldn’t be an issue. Michael Devery is senior vice president and market manager for the Boulder office of Silicon Valley Bank.