5 tips to score venture capital funding

NEW YORK (CNNMoney.com) -- When it comes to funding your start up idea, a well honed business plan may get you in the door, but for most venture capitalists it's the person behind the plan that makes or breaks the pitch.

CNNMoney.com asked several venture capitalists to reveal what they look for in entrepreneurs before they will even consider investing in their start up. And for the most part, they were all in complete agreement.

Peter Boni, president and CEO of Wayne, Pa.-based Safeguard Scientifics (Charts) investment firm summed up five key characteristics that backers look for: "passion, focus, people, innovation, and product."

Boni's firm, which has invested in QVC and Novell (Charts), as well as many of the VCs we spoke to, generally look for investment opportunities that are at the revenue stage, which means the product has already been introduced into the market place, customers can be quantified and the competitive landscape can be defined.

The typical investment is between $3 and $10 million. But to score that kind of cash, entrepreneurs should take heed of the following criteria:

"Aside from the usual paper trail of credentials, the most important thing is that [entrepreneurs] have a great passion for the idea," said Charles Rothstein, senior managing director at the VC firm Beringea.

"So even at 11pm, while watching the evening news, they're thinking about how [what's going on in the world] can impact their business."

Beyond a passion for a specific idea, the VCs agreed that "a founder must be seriously committed to making the business a success," according to Donald Caldwell, founder and CEO of Cross Atlantic Capital Partners.

That kind of conviction will lead a company forward, added Chris Greendale, a general partner at Kodiak Venture Partners which funds technology companies, including e-tail consultancy ChannelAdvisor.

To that end, "what we look for is overall business acumen," he said. And if that person has specific domain and market experience that's even better.

Almost as important as the individual driving the business is the team of people backing it up.

All agreed that the team is a reflection of the leader. "Investing in a start up is all about having someone who has the ability to attract other good people," said Greendale.

A tight-knit team can also provide valuable evidence to an investor of the leader's ability to maintain enduring relationships, which can be very valuable in the long run. For example, if the team is comprised of family members or old friends, "it speaks to [the leader's] ability to keep a work force together, build a team and have camaraderie," added Rothstein.

"There's some comfort when you find an entrepreneur who has been successful working with the same team."

It may be obvious to some, but many VCs said that finding a start up with a unique approach to the marketplace is unusual in and of itself. "There has to be something unique about what they are doing," Caldwell said, citing one firm in his portfolio, Gain Capital, which uses software to facilitate currency trading over the Internet.

"[The product] should be new and different as opposed to more and better," Boni explained.

And when it comes to the business idea, investors are concerned with the risk versus reward. "There are a lot of nice business ideas that could make a decent living, be a success and all that, but that won't be a big enough hit to make the investors happy," Caldwell said.

That's why entrepreneurs should be focused on the top line, according to Greendale. "This whole business is about growth, and we're providing fuel for growth," he said. More growth will of course deliver better returns for investors.

And that's where the business plan comes in. A solid pricing plan, sales model and a detailed approach to the market must not only make sense but provide proof that the team has identified the principal challenges that they'll encounter.

A bulletproof business plan may be a necessity, but as with so many things in life, things rarely go according to that plan.

Caldwell notes that in business there is a general rule of thumb: "The only thing you know for sure won't happen is what's in the business plan."

Which is why, as far as potential investors are concerned, the plan is only as good as the people behind it.