At an event not too long ago, while I was on a panel, someone asked me, “what is the one thing entrepreneurs need to be successful?”  My answer was “sweat.”

I always fall back on this answer when I am asked that question.  Because nothing is more important for a startup than the hard work and long hours of the founding entrepreneurs.  But when I answered it this time it made me think of something else.   Sweat is absolutely necessary for success, but this has to be coupled with the ability to adopt what you are learning while you are sweating away.  The best entrepreneurs are open-minded while they are putting in the countless hours and are willing to adjust their boundless energy to make their venture a success.

So answering the inquiry about attributes opened my mind to a new answer to that question.  Yes, it takes lots of sweat to be successful, but flexibility has to be accompanied with that energy.   Bottom line is that to make your startup successful you need to work crazy hard and be 100% ready to adjust to what you learn along the way.  That is what I did in re-thinking the way I answer this oft-asked question.

About the author: Tom “TK” Kuegler is a managing partner with Wasabi Ventures.

I mean a couple of things by this.

First, the smaller picture. To us at Merus Capital, the most critical element of a pitch for any type of startup is that it must come across as something that you are truly passionate about and really, sincerely want to see become a reality. No shortcuts, no BS, no quick flips, and no pretending that there aren’t massive challenges ahead.  Challenges are OK. Finding ways to overcome them is what we’re all trying to do. Otherwise, where’s the fun?

Second, the bigger picture. And this part is more personal to me than just my capacity as an investor. I would love to find startups that are building products and services that encourage, and allow for, greater authenticity. Authenticity of information, opinion and emotion. And hopefully in ways that *help* people–don’t just entertain me, rather allow me to be more productive, make more informed decisions, work or play smarter, be safer, save money, whatever it is that can improve lives personally and professionally. Certainly the social web is helping us get closer to the vision. As examples, I’ll look briefly at three well-known communication platforms through the lens of productive authenticity: Facebook, Twitter, and Quora.

Facebook may be the leader in this light but to me, it doesn’t go far enough. I don’t really have 250 close friends and for me, it isn’t a useful productivity tool. Entertainment and personal connection, yes, but productivity and all the things mentioned above, not really.

I find Twitter to be a better productivity tool than Facebook, and thus a much more integral part of my daily life. And while the ability of Twitter users to spread important and useful information worldwide instantaneously is a fundamental societal shift, the cynic in me would say that at times Twitter can be a self-promotor’s dream–a bazaar of false modesty, feigned exuberance and hollow praise.

Quora starts to get at the issue. Real people with real knowledge on certain topics and events sharing their perspectives. But it still suffers from much of the blatant self-promotion that other services do. No doubt they are working hard to reduce the noise in the signal.

But how about the next communication platform? Can we build one that promotes and preserves true authenticity, exploits deep personal and professional relationships and helps people in their daily lives? I would love to find out.

About the Author: Sean Dempsey is a founding partner at Merus Capital, an early-stage venture capital firm in Palo Alto, CA.  Prior to Merus, he spent a decade in Corporate Development at Google and Microsoft.  His blog can be found at www.avirtuouscycle.com.

While I admit that I’m not what one would call a “seasoned venture capitalist,” I am a keen observer of the human scene, and what I have noticed about venture capitalists is that they go with their gut way more than any bank would.  They bet on the people more than the businesses because they know that even a sound business can — and often will — fail in the wrong hands.

The ability to identify the right people and fund the right startups is what separates a good venture capitalist from a broke hobbyist.  This takes the kind of skillful analysis required of an investment portfolio manager and the kind of intuition required of a high-school baseball scout.  It’s touch and go, and even good VCs will tell you that they fully expect that vast majority of their gambles to end badly.

Every once in a while they find the diamond in the rough and a successful company is born.  The satisfaction (and ultimate payday) that comes from fostering such growth is what keeps most VCs in the game.  It also keeps the economy humming along quite nicely.  According to the US census bureau in 2004, businesses with fewer than 500 employees were responsible for creating 58,597,452 jobs in the US — more than the 56,477,472 created by the “big guys!”  It will be interesting to see if this dynamic still holds true when the 2012 Economic Census data is fully released.  I suspect it will.

I suppose that entrepreneurs and venture capitalists should be happy that local governments around the country are taking note of just how important startups and small businesses are to the American economy.  Hopefully this recognition will spur them to cut business taxes and make it less onerous to own a business, allowing more people to work for themselves and employ others.

But while certain states are looking to make their tax climate more business friendly, others are hoping to take a different path.  Maryland, for example, is hoping to create a $100 million “venture capital fund” to help startups get the funding that they need.  This begs the question: how will getting startup funding from the government be any different from obtaining it from a bank?  Will the government be relying on their keen investment instincts and famous ability to judge people swiftly and accurately?

Much as I will be watching the release of the 2012 Economic Census data, I will be paying attention to how this new level of government involvement in the creation of small businesses may affect the VC world.  I can’t decide if it’s the cynic or the realist in me that predicts a trivial change, at best.  Good businesses will begin as they always have — at the hands of a tireless entrepreneur who works hard for his money.

About the author: John J. Walters is a freelancer with WasabiVentures and research associate with the Maryland Public Policy Institute.

The post comes from VentureBlog, a side-project of David Hornik of August Capital.  Unfortunately his updates are a little infrequent and irregular, but his content is solid.  His most recent post is on how beginning entrepreneurs gain the credibility required for investments from venture capitalists.

I have a few things to add about the article as well — just be sure to read the original post before continuing here.

On the topic of borrowing credibility: this stems from the fact that if you surround yourself with people who already “have it” then it is generally only a matter of time until you have it too. By “it” I don’t just mean credibility, but experience, work-ethic, and know-how as well.

They say that you should take a close look at the ten people closest to you, for you are some combination of these people. If you surround yourself with people who are successful and can keep your eyes open then its only a matter of time until their habits rub off on you.

Hornik’s other point, about gaining credibility, really comes from knowing everything about your business before it even exists. People sometimes forget that you need to prove not only that you have a good idea and a passion for the work but that you know enough to get this thing off the ground.

This isn’t so much about credibility as it is about dollars and cents. Does investing in you make sense? If you were going to a bank for a loan instead of a VC there would be certain things they would ask for. You should have these no matter what. Sure, “you gotta have heart” but it takes more than that in the business world.

John J. Walters is a freelance associate with WasabiVentures

To quote Amy:

We’re bootstrapping because we’re all consultants or former consultants (including the author of Scriptaculous), and we’d really like our new business to be all our own. We have friends who have accepted VC and then had difficulties pursuing their vision, due to pressure from the investors — who of course, want to protect their investment. Because our #1 goal is a sustainable business, we feel we can make choices that others can’t, when they are answerable to an investor. (Even if it’s their Uncle John.)

Here is our interview:

Q:  When did you decide that you were not going to take VC funding?

A: From the outset, when we were brainstorming what we’d do as a company. (Freckle is just the first app in a series of apps we want to develop. Clearly taking VC just for a time tracking app would be overkill.)

Q:  How did you have to adjust your business plan by going the bootstrapping approach?

A: We’re two small companies (2 and 3 people) working together, and we both pay our bills with consulting. That means that we have to work extra hard to make time to focus on our product, and handle support questions, write documentation, blog, promote, etc. Our lead time on designing and developing features, tuning the marketing materials, etc., is all much longer because we can’t devote all our time to it.

But on the other hand, it gives us perspective because we use Freckle to track our own time for our clients — our other business relies on it. And it means that we don’t have to scramble for every potential customer to pay our bills, which means it’s easier for us to stick to our vision and just say “No” to some people who say “I really like your product but can we change everything about it?”

Q:  How often have you had to turn down VC overtures?

A:  I don’t think we’ve had to turn down any *serious* offers yet. A couple people have mentioned it in passing. But again, from the outside, we look like “just another time tracker” — once our more ambitious plans come to light, I think we’ll have to work on a polite deflection!

Q:  What is the biggest sacrifice you have had to make having gone the bootstrapping route?

A:  Time and focus. We’re pulled in two directions, with our “real” businesses and our budding Software-as-a-Service products. It’s a challenge.

Q:  Do you ever see yourself taking a round of funding?  If so, what would be the driver to do that?

A: Yes, with some caveats. We have a very clear vision of where we want the business to go, and how our products should look and act. We know what we don’t want to ever build and the customers we do not want to have.

If we were to find an investor who agreed with our direction and would trust us to do our best work, we’d absolutely be interested in taking a small amount of funding. We’d especially be interested if that funding brought us an amazing advisor, like 37Signals with Jeff Bezos.

Q:  What is the biggest thing you are missing as you bootstrap without the assistance of a VC?

A: Freedom to focus on our products 8 hours a day, 5 days a week.

Q: So do you see your goal to be another 37signals?

A: No, we want to be more of ourselves

We think there’s a lot of good things we can learn from studying the strategies of companies like 37Signals, the stuff that startup bloggers often don’t write about, but we didn’t set out to emulate anyone.

Our similarities are: SaaS, bootstrapped by consultants, focus on design. The differences are in everything else

Recently, we were able to catch up with Richard Palarea, CEO, about PA & Associates‘ growth plans using a bootstrapping approach:

Q:  When did you decide that you were not going to take VC funding?
A:  We never entertained the idea until an Angel approached us with “the million dollar” question (what would you do if you had $1M). It got us thinking about how we might boost the growth quickly. The decision was made after careful re-forecasting of our revenue and expenses. Our (outsourced) CFO reported that everything we want to accomplish could be done through bootstrapping.

Q:  How did you have to adjust your business plan by going the bootstrapping approach?
A: We decided to future-proof our business with a long-term vision. In reviewing our historical successes and accolades, most investors or shareholders might think that we’re looking past easy growth and revenue opportunities in leveraging our existing, proven model. Because what we do relies heavily on the cooperation and involvement of UPS and FedEx, we have decided to take a look 3-5 years out and create a business that will last another 20 years. This has allowed us to maintain decision making control, but also has us possibly forgoing some profit distributions in order to fund the new vision.

Q:   How often have you had to turn down VC overtures?
A: Just once…so far.

Q:   What is the biggest sacrifice you have had to make having gone the bootstrapping route?
A: I don’t feel we’ve had to sacrifice anything (yet). If anything, the opportunity has produced a keen vision of where we want to go, an awareness of other revenue opportunities/partnerships/alliances we were overlooking and a discipline to convert opportunities to clients and convert projects to billings.

Q:   Do you ever see yourself taking a round of funding?  If so, what would be the driver to do that?
A: It’s a possibility. I think if we found the right group that offered more than cash and if we had a need that required immediate, strategic spending to either create barriers to competition or gave us a significant advantage where there was a sensitivity to the timing. We would look for a venture group that could provide strategy, guidance and other advisory services and advocacy.

Q:  What is the biggest thing you are missing as you bootstrap without the assistance of a VC?
A:  At present, I don’t feel we are missing anything. As the landscape emerges, we might find that immediate access to strategic capital may be attractive. That, however, would be for an opportunity that we do not yet know about.

Jake Stein is a co-founder of RJMetrics.  RJMetrics offers hosted business intelligence dashboards and database analytics to companies that operate online and facilitates the real time monitoring and reporting of business data to investors, managers, and advisers.

RJMetrics was described by Jake as :

RJMetrics is a securely hosted business analytics tool for database-driven sites. After profiling thousands of potential investments during our time in venture capital, a trend became apparent: e-businesses had mountains of untapped data in their back-end databases, but managers were unable to produce deep analyzes, keep them current, or use them in business decisions. Based on this insight, we founded RJMetrics to make business intelligence solutions accessible to any company that operates online.

Our QA with Jake about RJMetrics:

Q:  How often have you had to turn down VC overtures?
A:  We’ve turned down overtures from five different investors.  Of course, there’s no way to know if they would have panned out into actual investments if we had pursued them,  but I think at least some of them would have. We like everyone we’ve dealt with, and we know several of them from our prior jobs in venture capital. They would certainly be on the short list if we do take funding.

Q: What is the biggest sacrifice you have had to make having gone the bootstrapping route?
A: Our biggest sacrifice has been narrowing the scope of the problem we address (helping web businesses monitor and analyze the data in their back-end databases). We have a ton of ideas about improvements, features, and ancillary products that we have not rolled out, but I think that is a good thing.

If we had a bunch of cash on our balance sheet and hired a lot of people, it would be tempting to do a lot of things at once. As a resource-constrained company, we have to carefully prioritize everything we do, and postpone or nix anything that will not result in a dramatic improvement.  We are successful if we do a small number of things extremely well, not if we do a decent job at a lot of different things.

Q:  Do you ever see yourself taking a round of funding?  If so, what would be the driver to do that?
A:  I’d say the chances are 50/50 we take funding.  There may come a time when the capital, advice, connections, and resources that a venture firm brings would outweigh what we would have to give up in independence and equity value.  I know that’s not a particularly specific answer, but we don’t have some plan like “When we get to five million dollars in sales, then we’ll get funding to take it to twenty million dollars in sales”.

We have gotten plenty of business so far through referrals and free advertising from some of our popular blog posts and a business intelligence rap video (really), but we may look to augment that with traditional advertising that we fund through an investment round.

Q:  What is the biggest thing you are missing as you bootstrap without the assistance of a VC?
A:  My honest answer is money. The politically correct answer would probably be that we’re missing out on advice, connections, or something like that, but I don’t think we would make significant changes to the business if we took funding today. It would be very nice, however, to get a little bit closer to the salaries we were making when we worked in finance.  We’re focused on maximizing for the long term though, so we’re trading off a little now for (hopefully) a lot down the road.

With Greg in mind, WV is going to do a study of entrepreneuers who have shunned VC and are making it on their own.