FOR START-UPS, NOT ALL VENTURE CAPITAL IS THE SAME

SAN FRANCISCO - Money is money, right?

Wrong.

In Silicon Valley, money comes in infinite shades of green. Thisis what James and Jon Slavet - gangly brothers who grew up in Weston -found out when they came out here last year to build their Internetstart-up.

Having garnered $60 million from investors for

Guru.com, a site that matches freelancers with jobs, the Slavetscame away with a big lesson about the rituals of raising capital inthe Valley: Not all money is the same. The hoops they needed to jumpthrough when raising their first dollar were vastly different fromwhat was required to raise their last.

"In general, it gets increasingly clinical as you go higher up themoney chain," said James Slavet, 30, the younger of the two brothersand a recent graduate of Harvard Business School. "This last round,the investors snapped on the rubber gloves and went through ourfinancial statements with a scalpel. In the beginning, no one evenasked us for our business plan. They just wanted the three-pageexecutive summary."

Entrepreneurs tend to raise money in rounds, once they haveexhausted their own savings and the contributions of so-called"friends, families, and fools." The first round generally comes fromwealthy individuals, often called "angels." The next round or twoinvolves venture capital firms. And in the later rounds, the list ofinvestors usually includes key companies that do business with thestart-up.

"Each of these rounds tends to have a slightly different flavor toit," said Jim Creigh, vice president and general counsel ofGarage.com, a business incubator in Palo Alto, Calif., that advisesand invests in start-ups.

As a result, entrepreneurs need to tune into the varied needs oftheir investors and alter their pitches accordingly, said JamesSlavet.

Angels, for example, are less interested in detailed financial infor ma tion, since there isn't much of a company to analyze in thebeginning. Early stage in ves tors are more interested in the ideaand the founders.

"We have a saying here: Bet on the jockey, not on the horse," saidCreigh, who has brokered numerous deals in his previous job as anattorney with Wilson Sonsini Goodrich & Rosati, a high-poweredtechnology law firm in Palo Alto.

In the second round, the focus broadens to include key employees,said Jon Slavet, who is 32 and Guru.com's chief salesman anddealmaker, while his more analytical younger brother makes sure thecompany functions smoothly.

"The questions in the second round centered more around othermembers of our team," said the elder Slavet. "They also wanted totalk to our customers. They wanted to see if we had the ability toexecute our idea."

As the company grows, investors become more interested in the nutsand bolts of the business and less on the people running it. Theimportance of the founders fade, while the business itself takescenter stage. The Slavets prepared for their third round of financingby putting together a book chock full of numbers, charts, andprojections.

"By the time you get to the later rounds, there's more of acompany there," said Creigh. "In most instances, the founders couldleave, and the company could still survive. The due diligence becomesmore of a classic financial decision in evaluating the company as agoing concern."

Investors in this round tend to be companies that have a strategicstake in the start-up's success. Consequently, start-ups will takemoney they don't need from a strategic partner, usually a largecompany operating in the same industry.

One company, Optical Networking Inc. in San Jose, Calif., courtedits largest customer, Williams Communications, as an investor."Sometimes, people do financing for nonfinancial reasons, as a way tocement an operating or strategic relationship," Creigh said.

Says Jon Slavet: "The questions are posed with an eye toward goingpublic. They want to know whether there is a huge market opportunitythere to sustain a public company, and whether you can be number onein your field. It's about painting a picture of this huge mountaintopas their opportunity."

James Slavet chimes in: "And guess what? We're going to get tothat mountaintop first."

Alex Pham is a Globe reporter covering Silicon Valley. She can bereached by e-mail at pham@globe.com.