Break Down the VC Barrier

So how do you land that very first round of venture capital for your startup? With persistence, a great business idea and a little luck. Here are three entrepreneurs who bucked the odds within the past year. Two of the three companies even landed funding before their product launched.

Company:Fashion PlaytesBusiness: Personalized clothing company for tween girlsCity: Salem, Mass.Founders: Sarah McIlroy, 38, CEO; Mary Beth Tirrell, 28, vice president of apparelFunding: $1.5 million raised in August from VC firms including New Atlantic Ventures

Former Hasbro Interactive, Atari and Brookstone marketer McIlroy barely had her Fashion Playtes website in beta in July 2009, when she started her funding search. Just a few hundred friends and family members were using the site, which offered five apparel items visitors could customize.

McIlroy recruited apparel pro Tirrell and created a website where tween girls such as McIlroy's 10-year-old daughter Madeleine could design and purchase affordable clothing. The site's average purchase is $30.

She knew fundraising would be tough at this early stage and in this economy, but McIlroy didn't want to wait.

The convergence of online interactive and fashion design was there, she says, and I felt the timing was right, and somebody else would do it if I didn't.

McIlroy worked her rolodex hard. One advisor introduced her to mass-customization pioneer Sung Park, who started Custom Clothing Technology, which was bought by Levi Strauss & Co. Still, one potential funder told her companies without at least $1 million in sales and an experienced management team couldn't get funding now, period. Undaunted, McIlroy pressed on.

Eventually, McIlroy's networking brought her to New Atlantic Ventures partner Tim Rowe, who knew McIlroy's name from her Atari days. When he presented Fashion Playtes at a partner meeting, NAV managing partner Scott Johnson pricked up his ears--he had a 9-year-old daughter.

I tried it out on my daughter and her friends, and they were just apoplectic with desire for it, Johnson says. That got us comfortable with the fact that it was a concept-stage deal.

With the funding, Fashion Playtes has expanded to 11 apparel items from dresses to jean jackets to purses, and plans to open its site to the public shortly.

Company:PaperGBusiness: Provides newspapers with virtual classified-advertising software and supportCity: New Haven, Conn.Founders: Victor Wong, 23, CEO; Ka Mo Lau, 22, CFO; Victor Cheng, 23, CTO; Roger Lee, 23, COO.Funding: About $1 million from funders including Launch Capital in early 2009

Yale students Wong, Lau and Cheng got together in March 2007, creating a virtual bulletin board where student groups could post their event notices free, and local businesses could pay to post, too. Soon they signed up the New Haven Independent and launched their Flyerboard product, which enables papers to offer interactive, easily shareable, graphical ads for around the cost of an old-time plain-text classified ad.

It was literally a couple of us in dorm rooms, Wong recalls, working on the technology and calling newspaper publishers.

PaperG soon got free office space courtesy of the Yale Entrepreneurial Institute, and expanded its contacts by adding Harvard student Lee, a move which helped sign up the Harvard Courant. Then-Yale School of Management professor Steve Taylor, a former publisher of The Boston Globe, joined PaperG's advisory board and helped land the Globe as PaperG's first major customer. Media giant Hearst Corp.'s Houston Chronicle came on board next. After the Flyerboard did $100,000 in sales in its first four weeks at the Chronicle, Hearst laid plans to roll it out to additional papers.

The startup was introduced to new venture fund Launch Capital by Yale Institute director James Boyle. Launch was just setting up an office in New Haven, and Wong shed his dorm duds for a suit and made his pitch solo, amidst unpacked office furniture.

I remember him being so nervous, says Launch managing director Elon Boms. But two things were extraordinarily impressive--they'd come a long way with relatively nothing, and had top-notch advisors.

Now, PaperG's founders have all either graduated or withdrawn from school. The company has 10 employees and is racing to keep up with demand for its Flyerboard and the back-office support system that allows newspapers to accurately track ads and bill clients for the service.

Company:GreenRay SolarBusiness: Simpler, cheaper residential rooftop solar-power componentsCity: Westford, Mass.Founders: Miles Russell, 55, CEO/president; Suparna Kadam, 35, strategy officer; Ruel Little, 45, CTO; Zachary King, 30, COOFunding: $2 million in July, from 21Ventures and Quercus Trust

GreenRay co-founder Russell would have loved to postpone raising money for a year or two. But the company had to raise matching funds immediately to keep $3.3 million in funding it had received from the U.S. Department of Energy to help develop its advanced solar-power converter.

After spending their careers at major institutions including MIT and Schott Solar, Russell and his team needed a crash course in venture capital. GreenRay made critical connections by entering the Ignite Clean Energy competition. Their third-place showing helped get them an introduction, through Sissi Liu at the state agency Massachusetts Technology Collaborative, to David Anthony at 21Ventures.

GreenRay's first meeting with Anthony in a Boston hotel room was interesting--Anthony turned out to be legally blind, and their carefully rehearsed PowerPoint presentation was useless.

He'd say, 'Just explain it,' Russell recalls.

Apparently, they explained it well. Anthony wanted to do a deal immediately, but Russell felt unready. (Anthony says it's only in recent years that startups in the solar-energy field have spun off of major corporations, so it wasn't unusual in the green-power sector that GreenRay's team were VC virgins.)

A few months later, GreenRay wanted the deal, but Anthony was busy and suggested perhaps one of two 21Ventures-funded startups might back them. Those companies lobbed GreenRay back to Anthony with a strong recommendation that 21Ventures invest.

Feedback from our portfolio companies changed our minds, Anthony says, and made us say, 'We think this is a very good play.'

With its new funding, GreenRay's product is in the final stages of obtaining needed certifications, and Russell says the product will likely be ready for market in the second quarter of 2010.