By Eoin Callan and Elizabeth Rigby

Venture capital funds are plentiful, but getting the "smart money" that puts an internet start-up on the fast track is still a big challenge. Venture capital investment in the US reached a new high of $35.6bn in 1999, shattering the previous annual record by 150 per cent, according to PwC, the business services company. European venture capital investments rose by 50 per cent from 1997 to 1998 to reach $13.9bn, and continued to grow in 1999, according to the European private equity and venture capital association.

Entrepreneurs who participated in the FT.com discussion on internet start-ups said the flood of venture capitalists and business incubators had muddied the waters and left the sector spinning.

Louise Kehoe, the FT correspondent, who hosted the forum from San Francisco, reminded users that finding "smart money" to back a business venture was still the name of the game. The significance of being funded by a top-tier VC cannot be under-estimated, she said. "These VCs have contacts throughout the industry so they are able to open doors that may lead to business partnerships, or sales opportunities."

The top VCs also have links to the best lawyers, headhunters, PRs and other professionals whose services are critical to the success of a startup, she said. "Being part of a top VC firm's 'keiretsu' puts a startup on the fast track."

Louise Kehoe cautioned that "startups that go after the 'smart money' must often accept a lower valuation, or give up a bigger portion of equity".

One entrepreneur, who spent months perfecting a business plan, said: "Going through the process of getting funding is very frustrating and a lot of hard work."

A number of entrepreneurs complained "that VCs and incubators often keep their prospects 'hanging on', take a long time to say no - while interacting with them is very time-consuming."

A forum contributor in the UK said "VC" was more likely to stand for vulture capitalist than venture capitalist in Europe, a far cry from the cult-status enjoyed by the money men in Silicon Valley. "The real problem in Europe with funding is the cultural gap between entrepreneurs and VC funds. More and more European entrepreneurs - with a US style and business approach - are evolving. But they meet VC fund managers who stick to European procedures."

One participant cited preliminary results from a UK web survey in which 73 per cent of respondents said that they had found the experience of raising money "very time intensive and a distraction from building my business".

One VC, although stung by the criticisms, admitted that fund-raising is a frustrating and complicated process, "and I apologise on behalf of my colleagues for that . . . but at the end of the day we are running businesses, too, which need funding and revenues and returns".

He added: "VCs are no more greedy than the entrepreneur they invest in: the entrepreneur seeks to make a return on a good idea and effort - effectively, intellectual capital - whereas the VC seeks to make a return on his or her cash and advice. One cannot work without the other." *** Is Microsoft doomed? The verdict in the Microsoft antitrust case was damning. The company had violated antitrust laws and undermined Netscape Communications by bundling browser software into Windows. Microsoft's overall conduct was anti-competitive and its tactics "predacious", ruled Judge Thomas Jackson.

But what did FT users think of the federal judge's verdict in April - would the verdict lead to Microsoft's demise?

"Doomed? Not by a long shot," said one reverential Microsoft supporter who went on champion the company as a "US treasure" and its founder Bill Gates as a "capitalist hero".

Another Gates sympathiser likened the trial to "a witch-hunt", led by other market players. "The Justice Department has misapplied the antitrust law at the behest of Microsoft rivals who only believe in free markets under the conditions that afford them - not their competitors - an advantage."

Despite these protestations, Microsoft's de facto crushing of the competition was now de jure, and enshrined in law. This would eventually "kill off Microsoft", according to some prophetic users: "Microsoft will drown under a wave of civil anti-trust litigation."

There were also predictions of other legal threats. "Shareholders will form a class to sue Microsoft. This will probably take the form of a shareholders' derivative suit. The point is that the shareholders may well sue Microsoft for management's colossal failure to steer the company out of its current legal predicament."

While some users quibbled over the ruling, others turned their attention to possible remedies.

Louise Kehoe, FT correspondent who hosted the forum from San Francisco, said: "Several state attorney generals are expected to push for a break-up of the company. The Justice Department may be more measured in its proposals. It would not be surprising to see Microsoft's business partners protest the idea of break-up.

"On the other hand, Microsoft rivals are keen to see the company torn apart."

But which way would the Justice Department sway? Possible solutions fell into two categories; structural - a break-up of the company - or a "conduct remedy" to restrict Microsoft's business practices.

Paul Maidment, editor of FT.com, asked: "Would an appropriate remedy be for the court to require Microsoft to make the Windows source code open? That might rekindle the third-party innovation the company is said to have stifled, redress consumers for their perpetual role of being paying Microsoft beta testers and let the regulators avoid the AT&T-like pain of trying to break up the company."

Others saw break-up as advantageous rather than punitive: "Microsoft is not doomed at all. In fact, a clever split-up of the company will enhance the overall value of the separate 'Nanosofts', allowing the new companies to act more dynamically and result in lower restrictions on further acquisitions."

Another user agreed: "Once the dust settles, Microsoft could easily come out in better shape than it was before. Most of Microsoft' competitors - Cisco, IBM, Hewlett Packard et al - have realised size isn't everything. HP split its scientific business from its core IT products.

"IBM has undergone a raft of disposals, acquisitions and strategic partnerships to re-focus its business. And Cisco has been a benchmark company in that it has grown to the same size as Microsoft through partnering and acquiring at the rate of one deal a day for almost three years."

But would the benefits of the antitrust case feed through to consumers using Microsoft's operating platforms?

"You have to return to the question of whether consumers really lost out by having an operating system and browser 'joined at the hip'. For most users, I would suggest that this arrangement actually makes life easier", argued one user.

An Apple Mac owner described using Microsoft products on a Mac as a "dubious pleasure . . . together with limitations for the user to find alternatives".

One participant was more vociferous: "Microsoft has often appeared to be unconcerned with the end-user. Delivering bug-ridden software, networks that crash and forcing 90 per cent of the computer users to 'take it or leave it.'

"I'd like to see their fundamentally callous and arrogant culture turned around so that they care more about the client. Making that change will require more than a re-organisation."

Ultimately, he concluded, whatever remedies the US Justice system settles on, "for the consumer, a wider choice of better software has to be the ultimate goal".

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