State needs a strategy to sow up seed money.

• Position: Economic Outlook

North Carolina companies raised $368.3 million in venture capital in 2003, according to a survey by PricewaterhouseCoopers, the National Venture Capital Association and Thomson Venture Economics. Though the state was ninth in the nation in venture deals, its total decreased 41.3% from 2002--25.7 percentage points more than the national rate. Monica Doss is president of the Council for Entrepreneurial Development, a Research Triangle Park-based nonprofit that promotes entrepreneur-ship in the Triangle.

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BNC: Why are national rankings important?

Doss: You must be in the top 10--whether it is eight, nine or 10--to show you are starting to play the game.

Where will North Carolina be this year?

I think we'll make it again. There's only a $40 million spread among eighth, ninth and 10th place. A deal or two can make the difference. Georgia, Virginia and Maryland are within shooting distance. The primary difference is our longer-term support of life sciences. Georgia and Virginia have historically been IT economies and are just recently focusing on biotech. As the tech sector rebounds, if North Carolina doesn't increase IT capital or allows its biotech position to weaken, we can see ourselves displaced.

Why was 2002 a good year?

It was very irrational. The industry was growing like crazy. There was the sense that you had to invest early. You lost if you weren't in what was perceived as the next great thing. You tended to invest before ventures really had much traction in terms of products or sales. Now it is different.

How so?

We are returning to how we did business in the mid-'90s before the tech bubble. Investors are looking for companies to have validation. If it's a tech company, it needs to have sales and customers. In life science, investors want more clinical data or to see that a startup has an arrangement with a corporate partner.

Is competition growing?

We have a target on our back, especially in the Southeast. That's actually a good thing, reflecting that regionally we've grown the industry and talent. What I'm seeing is more aggressive and more pre-emptive efforts by states like New Jersey and Pennsylvania. They are looking at where the funding gaps are and are trying to fill them. Pennsylvania, in particular, has addressed the issue of early-stage funding over the long and short haul. The Ben Franklin Partnership has been investing state funds for more than a decade.

Where are North Carolina's funding gaps?

We...