Venture Capitalist And Small-Business Expert Ruthann Quindlen Want to get inside the mind of a venture capitalist? Read on to learn from the experiences of Silicon Valley vet Ruthann Quindlen.

If there's one meeting that can strike fear in the heart ofany entrepreneur, it's that first face-to-face with a venturecapitalist. Imagine (palms sweating) standing in front of a room ofhigh-powered deal makers (nervously clear throat) who have thefunds and the experience to truly help your business get off theground.

Ruthann Quindlen is one of those folks on the other side of theconference table. Beginning her career in the finance world as ananalyst at a Boston-based investment bank in 1982, she had theforesight to join the burgeoning venture industry in the SiliconValley in 1993. As part of the venerable early-stage venture firmInstitutional Venture Partners (IVP), Quindlen has been on thefront lines, watching and helping some of the largest names on theNet get started.

In Confessions of aVenture Capitalist: Inside the High-Stakes World of Start-UpFinancing (Warner Business, $25.95), Quindlen shares herexperiences of watching start-up companies come, go and survive,specifically addressing the mistakes that first-time entrepreneursoften make. We've asked Quindlen, who is currently forming herown venture firm, Ironweed Capital, which is focused on seed andfirst-round funding for first-time entrepreneurs, to share some ofher knowledge of the start-up tech world.

Entrepreneur.com: Why did you wantto write this book?

Ruthann Quindlen: The reasonI wrote the book was for entrepreneurs. They were doingpresentations on their ideas and their companies, and there seemedto be a lot of things they didn't know. Not necessarily aboutventure capital, but about building a company. And I thought, Howwere they supposed to know? Maybe they had a friend who [was anentrepreneur], maybe they got a piece of advice, maybe it waswrong. So I thought, I'll write a book with the common mistakesthat I've seen.

Entrepreneur.com: What'sthe layman's definition of venture capital? How does it differfrom angel investment and investment banking?

		"If you don't have a clear idea, youcan't build a great company."

Quindlen: The differencebetween angel investing and venture capital is, one is an amateursport and one is a professional sport. [Angels invest] as a hobby.Sometimes they've made lot of money in a prior company and theyjust want to kind of get involved with a few companies. Venturecapital is a professional business-when times are bad, we still doit. If the company's in trouble, we still do it. We don'tjust do it at the beginning and then let other people take over. Wecarry it all the way through.

In terms of what it is, we get money from what are calledlimited partners-those are university endowments and pension fundsthat need to diversify their risk. They have a little portiondedicated to high-risk equity, which is what venture capital is. Wetake that money and invest it for them in [developing] companies.And you can be involved in all stages-from a very early stage to avery late stage-and the dynamics are different in all the stages.Then when the company has a liquidation event-either going publicor getting acquired-we distribute those shares to the limited andto ourselves in a split that ranges between 70 percent for them and30 percent for us to 80 percent for them and 20 percent for us.

Entrepreneur.com: In thebook, you say there's a divided camp among venture capitalistsas to whether good people or good markets are more important for acompany. Why the dichotomy? Have you made a decision as to which ismore important?

Quindlen: As with mostthings, the answer is both. You need both to succeed. What I'vefound in my history is that with good people, a company will find agood market even if they didn't make one on the first try. Itend to lean in the direction of great people. You still need agreat market to make the company work [of course.] With the bestpeople in the world, if you have a crummy market, it doesn'tfly.

Entrepreneur.com: What isthe "elevator speech test?"

Quindlen: I found that whenI was describing the [potential] investments to my partners, if ittook me longer than a few sentences to describe what the companydid and what it's value proposition to its customers was, thenI didn't have a very clear idea of what they were doing. Ifound it was the same with them describing their business to me. Ifthey couldn't describe in a few sentences-in other words, thetime it takes to go between floors on an elevator-what theircompany was and what the value proposition was, then they probablydidn't have a very clear idea either. And if you don't havea clear idea, you can't build a great company.

Entrepreneur.com: What aresome of the biggest mistakes entrepreneurs make during the earlystages of growing their business?

Quindlen: This book isreally written for first-time entrepreneurs. It's very basicand assumes you don't really know a lot yet or you haven'tbeen through it yet. And so I write about a lot of common mistakesin the book. [For example,] first-time entrepreneurs aren'tparanoid enough. They'll be telling you in a board meeting thattheir product and strategy are so much better theircompetitions'. And then the next time you meet with them,they've been severely trounced by the competition. So one ofthe things I say is it pays to be paranoid.

Another thing I talk about is leadership. You really need a CEOin charge of the company who can get everyone committed to a commongoal. When that's missing, the company loses focus, and focusis what causes the company to be successful at the very earlieststages.

Entrepreneur.com: What aresome drawbacks of the hype that accompanies many new tech and Netbusinesses?

Quindlen: The biggestproblem is that you draw attention to yourself from very largecompetitors. Take the example of Go Corp., which was one of thefirst pen-based operating systems. Because of the hype surroundingthe company, Microsoft got very focused on them and basically putthem out of business by getting very focused on a market that wasvery undeveloped. In a way, you could also say that happened withNetscape and Microsoft; part of the reason Microsoft paid anyattention to them was because of the hype around Netscape. Anotherthing that happens when you have hype is it causes your competitorsand people in the industry to kind of wish you would fail. Theyfeel you've overhyped the situation, and they're rootingfor you to not make it. That's a really bad situation.Competitors are competitors, but you really don't want peoplewanting you to fail.