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Jackpot!

Why bet the farm on an unknown VC when you can find a source with the funds and know-how you need to take your business to the big-money table?

Do you see the glass as half empty or half full? If you're in the former camp, you may view the tech wreck as the death knell for early-stage funding. If you're in the latter camp, you probably see a much different picture. Despite the tumult, cash is still available. But you need to give investors a reason to invest.

Sunil Dhaliwal, a senior associate with Battery Ventures, a Wellesley, Massachusetts, venture capital firm with $1.8 billion under management, looks at a half-full glass.

"If you believe early-stage funding can't be found, that's tantamount to saying there's no more innovation left to be funded," says Dhaliwal. "It's highly unlikely that 2001 is the year that innovation will cease to exist."

Of course, there are caveats. Investors want more experienced management teams, so first-time entrepreneurs will have a hard go. Also, investors are looking to capitalize on less crowded niches and are avoiding me-too companies. "The [best] candidates are those focusing on problems or opportunities that will crop up in [the next] 18 to 24 months," says Dhaliwal.

Tighter screening means fewer deals, but an optimist sees the silver lining. If the number of firms raising early-stage venture capital goes back to levels seen in 1996, '97 and '98, then 2001 could be the year when things finally return to normal. That's welcome news for businesses hoping to thrive in the post-New Economy.

The "PricewaterhouseCoopers MoneyTree Survey in Partnership With VentureOne," prepared exclusively for Entrepreneur, is proof that funding is still out there. By culling the firms with the most early-stage deals in 2000, we offer insight into the VC firms most likely to infuse your business with the cash it needs. (See "Top 100 Venture Capital Firms for Entrepreneurs")

Picking a VC firm, however, takes more than simply pointing at a name on a list. The most important thing is to find a firm that's a perfect fit with you and your business. The following three entrepreneurs did the legwork, and the following three investors liked what they saw--companies that complemented the investment strategies of their respective firms. When the two sides came together, they made very successful businesses--and that means everybody benefited.

--David R. Evanson
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This article was originally published in the July 2001 print edition of Entrepreneur with the headline: Jackpot!.

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