"...VCs can't teach them what they need to know. The only way to learn is through constant, low-stakes experiments, by keeping plenty of options open and then following up on the ones that prove the most lucrative."

Venture capitalists are not precisely marginalized, but , on the other hand, they are no longer the white hot center of the online universe. The VCs themselves are being much more selective and circumspect about which companies they invest in, and many entrepreneurs and companies alike have taken on a new caution about approaching VCs.

The VC Experience: Get It Right the First Time or Crash to the Rocks Below

There are several reasons for this.First, when the dot coms started to tank, falling domino fashion from April 2000 forward, venture capitalists suddenly were scrambling to prop up their best bets, save those puppies, and cut loose those struggling dot coms whose heads keep bobbing below water, even if it meant shoving them down for the last count with your boot.

Perhaps, not literally. But figuratively, for sure. When a VC tells you it's ok to have a $2 million or $10 million a month "burn rate", just come back in six months for more cash, then stops taking your calls, pulls up the drawbridge and throws alligators and red meat in the moat, you may feel like someone stepped on your head when you were underwater, even though all they really did was cut off the money spigot.

The Value of The Learning Experience Depends On What You Learn

As naive and,perhaps, provincial as it may sound, many of the company founders and first teams who signed on, worked 20 hour days, created something of value out of mere imagination and technology, put in plenty of blood, sweat and tears and deserved better. But this is the real world......we can feel that cold water hitting us in the face and, in fact splashing all over us......and we must learn to face facts. The entire funding episode, as painful as it may have been for those dot coms who crashed, amounted to an incredible learning experience.

Unfortunately, it was not a learning experience about the business itself. That was something else, that went along on a parallel track. If many of these businesses had time to mature, they probably would have continued to make one mid-course correction after another, until they came to a business model that worked, and, bit by bit, sale by sale, they could have achieved success.

What they learned, was that a venture capitalist only cares about money. And that might be a good characteristic for a visionary net pioneer to acquire. If he could only learn to marry a VC's single mindedness and financial sophistication with his own vision, drive and determination, a great company might be born. That is, in fact, how many great companies are born. But in these extremely truncated life cycles, there is no time to mature slowly and learn from experience. You either get it right the first time or crash from the cliff onto the rocks below.

And the VC doesn't just care about money, he cares about getting his return in 18 to 24 months, and he's not terribly interested in a business which can't achieve $30 million a year in revenue, because his ideal scenario is an IPO which takes him out of the business and puts the public in it within that time frame.

The Alternative

Established companies and entrepreneurs both are taking a look at approaching the Net differently. They are doing two things: first, they are analyzing the true nature of their unique assets and deciding how they can become a basis for a business. Second, "they are trying various approaches to extract value from those assets. Only through constant small-scale testing of the business in the actual marketplace do they determine what actually works," according to Eric Schonfled in Ecompany magazine.

Eureka. That sounds like a formula for success. It is what has worked for entrepreneurs for centuries, before they had any venture capitalists to loan them money or tell them it was ok to have a burn rate. A burn rate used to mean you might not have food on the table for your family and even a lowly entrepreneur knew that was not a good thing.

Analyze Your Assets: Look for Your Unique Value Proposition

You start by looking at the particular way in which you are smart. Being smart about specific, marketable things has value; it is "the raw material from which financial results are produced". This is true whether you are an individual or a company. Over time you will have developed a way of doing some things better than others. H&R Block knows their client's financial lives. Amazon.com has accumulated data about our taste in books, our credit cards, who we give presents to, our range of interests. Vanity Fair lures us with both style and gossip. Each of them excels in their own niche and, having determined what it is they do well, they keep honing their skills in order to do it better.

Assess Your Competitor's Strengths and Develop A Strategy

Once you have decided what your assets are.......what is your unique value proposition.....then you must assess your competitor's strengths in order to avoid competing with them in an area where they are as strong or stronger than you.

Let us say, for example, that you have been a consultant for small businesses in the Dallas area for a number of years, and have a roladex full of clients and prospective clients. Potentially, you have a lucrative business on your hands.

You determine fairly quickly you don't want to compete with banks, lending agencies or stock brokerages, all of which are bigger, better financed with deeper knowledge and more resources and contacts than you have.

What you do have is a lot of knowledge in the area and a way of relating to people that creates trust. The question becomes one of determining how to maximize and extract that value. The name Suze Orman springs to mind. She knows a lot about markets and money, although probably not so much as Merrill Lynch or Charles Schwab but she is also photogenic and personable; she has managed to extract value from that. How do you go about extracting value in somewhat the same way?

Zeroing In, One Step At A Time, Then Upping the Ante

Do you hold a series of seminars throughout the State?

Do you upscale, perhaps working in tandem with a couple of stock brokerages and launch a major conference with nation wide advertising?

Do you write a book and market it over the Net, and with a book signing tour of all the Barnes and Nobles, and Borders book stores?

Do you launch a website for small businesses, complete with free advice, email and chat rooms with streaming videos of your cutting edge presentations on small business strategies?

Before the dot com crash, it is entirely possible you would have developed a grand plan, convinced a VC, hired on a team, plowed money into a huge ad budget , cranked out a lot of publicity, and tried to do all four.

Today, some of the smartest of the new breed are doing things differently. They are starting, for example, as a speaker on someone else's circuit, selling books in the lobby to see how it goes. They may move on to holding a series of seminars. The trick, according to management strategist Michael Treacy, author of Discipline of Market Leaders" is to lower risks and maximize learning by taking a series of quick incremental steps. As each one is successful, you up the ante." And pretty soon you're Suze Orman.