Funding products, not just ideas: venture capitalists are busy once again funneling money into new and growing companies--but with limits. 'We're not handing them the keys to the Porsche up front,' says one.

• Author: Sweeney, Paul
• Position: Venture capital

In June, New York-based software firm Powerllel Corp. snared $5.6 million in a first-round financing led by Kodiak Capital and Castille Partners, two respected Boston-area venture capital firms. And now, it seems, the sky's the limit as other firms are lining up to write checks when the firm next goes to market.

"Investors are calling us, and they're excited about our momentum in the market," says Powerllel president Eliot Listman, noting that revenues are projected at $1 million this year, up from negligible numbers in 2003. Powerllel's biggest selling point is that it boasts real-time solutions to real-world problems: its "parallel processing" software slashes to minutes the time it takes Wall Street firms to tot up complex logarithmic computations involved in hedging risks--tasks that still can take up to 12 hours to complete.

Similarly, the same software--which is compatible with the IBM, Microsoft, Hewlett-Packard and Veritas software platforms most commonly in use--can dramatically cut through the welter of calculations involved in drug interactions and which are required for pharmaceutical companies' regulatory filings. And, it has applications for the utility and energy industries as well.

Meanwhile, the fact that Powerllel boasts practical software applications has sustained Listman, his two partners and what are now Powerllel's 15 employees in the aftermath of the dotcom bubble's collapse in 2000-01. "What we had going for us was the fact that this was not just interesting technology, but something that can save a firm over $1 million in just the next 12 to 18 months," he says.

And now, amid signs of general economic recovery in the U.S., a steady stock market and a rebound in investor appetite for initial public offerings (IPOs), venture capital firms are once again on the prowl for good entrepreneurial financings. That means that companies like Powerllel are emerging as prime beneficiaries. Listman says that the company is poised to raise $8 million to $10 million during the next financing round.

And what Powerllel is experiencing is, by all accounts, taking place across the board. The most recent MoneyTree Survey reports that, in the second quarter of 2004, venture capital financings continued to rise as $5.6 billion was funneled into 761 companies, up from $5.0 billion in the previous quarter.

Moreover, the MoneyTree Survey, conducted jointly by the National Venture Capital Association, PricewaterhouseCoopers and Thomson Venture Economics, notes that financing for companies receiving their first round of venture capital rebounded in the second quarter to the highest level in two years. Some $1.2 billion went to 208 companies experiencing first-round financings, a 22 percent increase over the...