Looking for the Silver Lining

Editor's Note

December 2009 / January 2010 By: Bob Cochnar Volume 7 Number 6

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Once I built a railroad, I made it run, Made it race against time.
Once I built a railroad; now it's done. Brother, can you spare a dime?

These days entrepreneurs aren't building railroads (although Warren Buffett spent billions recently to buy one) but many are asking if you, or somebody, can spare a dime (well, maybe millions of dimes).

Truth be told, venture capitalists, angels and other investors still have funds to invest. They are, however, picky, picky, picky. Of course, finding money has never been easy (What? You think it grows on trees?); the economic swoon has made it incomparably more difficult. But not impossible.

I call your attention to a set of articles in this issue (beginning on page 18) intended to provide some helpful information relative to the search for funding.

First, there's a primer that identifies potential sources including public-sector funding, which remains available to those who spend the time to search it out.

Then Dean Takahashi, our man in Silicon Valley, reports that "despite the tough environment, the traditional VC sector is still functioning. Seed capital may be easier to come by than larger later-stage rounds, but the pipeline for money has not completely dried up.

"One of the best leading indicators of a recovery in the technology startup funding is the reemergence of deal making."

One investor, Andy Sheehan, who is the managing director of Sutter Hill Ventures, observes that one of the truisms of Silicon Valley is that recessions are a good time to start companies. Employees are cheaper to hire and there are plenty of them available. All other costs are lower. Valuations aren't sky high, and so investors can get better deals for the money. If a company shows that it can monetize its products early, it is a lot easier to fund than companies that have no clear path to profitability."

Finally, John Deal, the CEO of Hyperion Power, a startup than plans to manufacture a small nuclear reactor using Los Alamos technology, offer a success story: Hyperion got the money (although, of course, it's looking for more).

So don't despair. Hard times will pass. I wouldn't count on money to flow like Niagara Falls, however; investors are likely to remain wary for some time. What that means is entrepreneurs need to get their acts together. Business plans should be clear, concise and convincing. Presentations should stick closely to the facts. And if the idea or innovation is good, better believe in it.

We'd like you to meet Gary Jorgensen of the National Renewable Energy Laboratory, Ralph James of Brookhaven and Tijana Rajh of Argonne. They are remarkable scientists and innovators and typify the best and the brightest in our national laboratories. Their stories begin on page 12. In future issues, we'll report on other innovators.