Even seasoned serial entrepreneurs wait an average of 21 months before they obtain first-round funding compared to 37 months for first-time founders, the authors said. The paper provides a number of other useful comparative measures against which entrepreneurs may judge their performance.

While the paper did not indicate when the clock began to run on these funding timeframes, it’s clear that waits shy of two years to over three years are longer than many of the expectations I typically hear today from founders in my consulting practice, or that I heard when I was a founder in my own startup. They also contradict the “word on the street” voiced by many around Silicon Valley.

The stark reality of VC funding availability underscores the importance for founders in obtaining adequate early seed funding to sustain their venture’s operations until the venture matures sufficiently to gain VC investment support. On the flip side of that observation, it also means that getting to revenue and profit is a cornerstone attribute, and remaining in “development paralysis” to create the perfect product vehicle only delays the moment when VC funding will be forthcoming.

Despite these facts, many founders dawdle over their alpha and beta products’ features, nuances, and non-essential elements, trying to get them exactly right before finding customers, putting their product in front of them, and asking them to pay to buy it. What’s better: a venture with the perfect product that ran out of money before it obtained traction, or one with a minimally viable product that attracted paying customers and obtained the VC funding needed for product perfection and rapid growth?

Kicking off a startup is hard enough when the founders do everything right. It’s downright challenging when one chooses to ignore the history of others and charts one’s own path against track records typical of those found in the middle of the bell-shaped curve.

Robert Dolezal, CEO–Consultiq

Unanticipated events, challenges, and their consequences roil our everyday lives. Yet we are inexplicably blind to real threats to our ventures and livelihoods. In last week’s news headlines, we learn that Eastman Kodak, once a Fortune 10 market leader, fully anticipated the impact of digital imaging on its core business 20 or so years before the threat came to pass, yet failed to respond and adapt with meaningful change. It just filed for bankruptcy protection. Why?

A core reason is the inability to hear the market through the cone of silence and positive affirmation we managers erect in our leadership team, advisors, and company cultures. As founders of early startups frequently realize too late, the blind 500-lb. gorilla that is ignoring our market can suddenly surprise us with an overwhelming rifle-shot focused on our opportunity. Conversely, we fail to see, hear and anticipate what the consumers’ fickle tastes now want, what our key competitors are doing to thwart our expectations, or how business conditions have changed since we first hatched our ideas. We are too deep in our code, too busy crafting the perfect elevator pitch, too oblivious to early customer feedback, too blind to pivot when we desperately need to do so.

Looking over the horizon is an acquired skill. It’s not reading tea leaves, gazing at crystals, or reading the Tarot. It’s a never-ending quest to listen to and evaluate the views of those outside your inner circle, spanning wide ranges of expertise, skillsets, and subject areas tangental to your core interests. If you have your head down working in network infrastructure, you may be surprised to learn about developments in intellectual property or nano science that will rock your boat. If you have a shallow network, it’s a cinch that you’ll only be able to predict within a narrow window of perspective.

So what advice can I share? Take advantage of those panel discussions, meetups, networking events, beer-and-bull…. sessions—they’re held nearly every night of the week somewhere close to where you work, live, or commute. They are mainly low-cost, and they’re extremely valuable even if you only make a single new contact or hear a lone piece of information that fits into your picture. In many cases, you’ll gain several. And don’t limit your participation to groups in your narrow focus area. Take advantage of the opportunity to intersect your focus with other elements of the marketplace and triangulate to see possible paths the future might take. Then test your hypotheses by asking your network what they think. Build strengths on strengths.

Sure, you may be trying to finish your beta and pulling 18-hour days-nights. Or, you may be watching your run rate converge with your bank account hitting zero and trying desperately to raise a new round. How can you take time away from those things to rub elbows in a noisy bar or meeting room with a bunch of people interested in something you know nothing about? Well, ignore the advice at your own peril.

Whatever you are doing, look up, look out, and listen. There’s no need to be blindsided roadkill. You have a wide circle of advisors to expand your ability to see your possible futures from your single pair of eyes to their many. Ask.

Bob Dolezal—Consultiq’s CEO and strategy expert

According to the forum circular, investment in U.S. cleantech went from $286 million in 2001 to $3.7 billion in 2010. However venture investments in cleantech fell 44% in the first quarter of 2011 compared to the first quarter of 2010 as venture capitalists became more cautious.  (According to the Cleantech Group, preliminary numbers for 2011 suggest that global cleantech venture and corporate investments totaled $8.99 billion, and cleantech M&A reached an aggregate value of $41.2 billion. Needless to say, the group is optimistic about the cleantech outlook for 2012.)

The panel includes Ryan Kottenstette, of Khosla Ventures, and Sven Stroban of Mohr Davidow Ventures. Moderator Christina Ellwood will try to assess the appetite for cleantech venture investing following the bankruptcy of Solyndra, and assess the ability of venture firms to raise the money they need to place bets in the sector. (Note the National Venture Capital Association’s sober outlook for venture capital for 2012. In a survey conducted by the group last year, 55% of venture capitalists sampled said they expect cleantech investing to decline this year.)

SVForum members get in for $25, and non-members pay $35; there’s also a $10 charge at the door, but dinner is included. (Cash bar.)

The event will be at the Crow Canyon Country Club, 711 Silver Lake Drive, Danville, CA 94526 on January 18th.

In the past two years, venture capital funds invested US$24 billion more than they raised in new funding. In 2010 alone, they invested $26 billion against raises of $14 billion, nearly a 2X deficit. Contrast this with IPO statistics: in 2011, approximately 50 VC-backed firms went public compared to 75 in 2010—and 2010 was not a peak year for VC-backed IPOs. CALPers, host of the California state employees retirement megafund, has cut back its allocation to VCs from 8% of its alternative pool of funds to 1% it will make available for VC investment. What’s going on?

A recent Wall Street Journal article (Some Venture Funds Hit ‘Pause’ on Big Deals) quotes super-Angel Mark Andreessen as saying he has “taken a step back” from high valuation deals and is now turning his focus to those where “pricing is still under control.” How do you say, “repeat of the bubble,”—at least among those of us old enough to have lived through it?

Putting a bet on the table has become a high stakes game at the same time as lots of young startups have stars in their eyes after seeing Reid Hoffman cash out big on LinkedIn and licking their chops over estimated valuations for high profile names like Facebook. There’s just one problem: as more and more startups are reaching the critical A-round and expansion B- or C-round funding stages, investors are looking at their prospects for making above-T-bill returns from high-risk venture capital investments, shaking their heads, and putting their money in other investment categories (or holding it in cash reserves to await a clearer economic picture).

This portends a wind-down is in the offing, and some solid performers may hit a stone wall just when they need to accelerate their growth with cash infusions. As for the weak ones? Uh-oh.

Word to the wise: if you are presently in the game with a venture, take steps now to line up your rounds and reduce your run rate or otherwise polish your margins. Delay new initiatives, defer those that are non-essential, and find non-cash paths to continue operations through the funding drought.

Batten down the hatches, sailors. It’s looking like those easy voyages to high-valuation funding are being postponed and a maelstrom of stormy times are in the offing for those with ventures underway.

According to a release today from the National Venture Capital Association, fourth quarter M&A exits outpaced IPOs  by more than eight times.

In the last quarter of 2011, 11 companies went public, down 67% from the fourth quarter of 2010; 92 venture-backed M&A deals were consummated.

However, aggregate M&A value for the year reached $23 billion, up 23% from 2010 and the highest level seen since 2007. In 2011, 52 venture-backed companies went public for an aggregate value of $9.9 billion, up 41% from 2010.

“Despite of flurry of IPO activity at the end of 2011, the venture-backed IPO market still has a considerable way to go on the road to recovery,” said Mark Heesen, president of the association. Heesen went on to say that a higher degree of global economic stability could fuel a more robust IPO market in 2012.

In mid-December, the National Venture Capital Association (NVCA) released a statement on expectations for the start-up ecosystem in 2012; the predictions were sobering.

“Realism, rather than optimism, abounds for the venture capital and start-up economies in 2012,” wrote the NVCA, drawing a joint survey conducted with DowJones VentureSource, “…predictions in critical areas such as IPOs and venture fundraising are tepid at best, reflecting ongoing, unavoidable challenges faced by VCs and entrepreneurs alike.”

Of venture capitalists surveyed, 58% predicted a funding shortage for seed and early stage companies and 67% predicted that raising follow-on money will be equally or more difficult in 2012 than in 2011.

Only 48% of those surveyed forecast and increase in the IPO market, and 69% forecast higher M&A volume for the new year.

“We can expect a competitive environment for capital on both sides of the venture business in 2012,” said Jessica Canning, global research director for Dow Jones VentureSource. “With nearly three-quarters of VCs predicting limited partners will commit the same amount or less to the industry and about the same proportion of CEOs expecting to raise money, financings could get tighter with some companies left to survive on their own.”

But what happens when those ideas are cast in stone and fundable? Experts at the National Venture Capital Association conducted a survey in conjunction with Dow Jones & Co., and found that almost 75% of U.S. startups plan to raise a traditional A round or a mid-size angel debt round in the coming year. Unfortunately, they will be asking for critical growth funds just as VCs experience a severe capital shortage.

The survey reports that 69% of VCs expect their investments to stay the same or decline next year, not grow. That’s a 21% increase from a similar survey last year. Add to that sobering statistic the fact that VC firm numbers are in double digit decline, from 1,312 in 2000 to 844 last year. Their numbers dropped nearly 5% in the past 12 months.

Last month’s SVASE-East Bay Series focused on what categories are expected to be hot for VCs–medical, hardware, and non-traditional (read: not high tech software or eCommerce) startups headed the list.

What does this mean to startups on the verge of an A-Round quest? Hard to say. We also heard that good ideas that proved out were not seeing a cloud of competitors emerge around their premise, as was often the case in earlier years. So a startup with that elusive “traction”—customers, revenue, and (gasp!) profit margin—may well find their way to growth and expansion funding. Those with less to show may be forced to close their doors, and that’s not good for our now-famous innovation economy.

Take last week, for instance. I spoke to a founder with a product in the marketplace—yes, and dogs eating dog food—who understood that his customers wanted more from his product. He was systematically testing concepts and getting customer feedback on improving his product, an interactive-design, tool-driven service. He understood that his resources were too limited to employ a scattered approach, and he was well on his way to improving his product and determining the optimum price point his customers would pay through a program of careful customer testing and surveying. That was heart-warming for me to see. He had his head in the right place to get a successful venture that will grow and become profitable.

Still, he benefited from hearing me repeat how investors view risk in a young startup. Eventually, he asked a question than any startup advisor constantly hears—”How much “traction” or “revenue” is enough for investors?” I had to explain that the answer to that question is always, “It depends;” not something that he or any other founder wants to hear. So here’s my explanation:

A conceptual startup is 100% risk to an investor–it has no product, no customers, no team, etc. At the other end of the curve is the mature startup about to cash out through an IPO or other exit. Nearly all of the risk is known, and that risk which remains unknown is quantifiable. Investors know what they are buying, in short. In between, it’s no-man’s land. At any point, the venture has some quantifiable and some unknown risk. Investors first try to figure out the level of unknown risk. If it’s too high, they pass. If some has been quantified and made predictable, they move forward to learn more and make a judgment call on whether the investment is right for them. OK so far?

Here’s the deal: Over hundreds of assessments, nearly every startup fails this simple test if it doesn’t have a product in the public marketplace—the only exceptions are for strong teams with a superstar founder and a track record of personal history with the investors. Most fail the test if they haven’t started charging for their product or service and had some customers buying it at that (or any) price. By contrast, the odds start shifting toward making the investors’ grade when the product’s cost is known, its revenue is known, and enough customers are buying to predict a trend towards break-even and profitability. By the time the venture is making profit, it has an even better chance of attracting an investor. And those odds improve again when growth accelerates. At each of these points, some additional risk has moved from unknown to quantifiable and become more predictable.

Yet, for some reason, I see far more teams concentrating all of their energy on fund-raising in the impossible-to-fund stages than I ever see of ventures with leaders focused on getting their product to market or selling it to customers. I call it the impossible equation—no matter how much time, energy and resources you expend, nothing makes your venture fundable until the risk is quantifiable and predictable. Diverting your attention from hitting those critical benchmarks just means that the startup is more likely to fail and its founders (and often, their friends and families) will be hurt before the team realizes that they missed the boat.

Give it some thought. If you were an investor, and you had a field of potential places to put your bets down, what would you be using as your criteria? Hot idea or growing revenue? Enthusiastic, smart team or strong net margin on each item sold? Wish list or customer applause? Competitors trying to enter your space and take market share, or stealth and silence? Founders, it’s your venture, your vision, and your execution to choose. Make your milestones count.

As Bloomberg reports, from 2006 to 2010, over U.S. $535 Billion flowed into Clean Tech startups from venture capital firms, private equity, and IPO, fueling 4,236 ventures. What they didn’t count on was a combination of blindsiding by technological innovation, market forces, and irreducible physical laws that KO’d many of these startups before they could emerge to liquidity events.

Then the first hammer fell—Solyndra went under and brought a glaring spotlight on the dual questionable practices of trying to beat a foreign government intent on dumping solar panel prices and milking public policy for loans unsupportable through due diligence. Within weeks, several more Clean Tech giants were under intense scrutiny.

Simultaneously, worldwide oil price benchmarks—having stabilized after skyrocketing to over $100/barrel on Middle East uncertainty, supply interruptions, and global debt crisis speculation—suddenly flattened out. Bloomberg’s article implies that one reason for this paradox was the discovery and deployment of new fracking technology that vastly expanded the recoverable natural gas supply worldwide, but especially in the U.S.A. Without fuel prices marching upward, the economics of Clean Tech couldn’t compete.

Where does Clean Tech go from here? Not back to the venture capital well for more infusions, if the sentiment on Sand Hill Road has any say. I’d put a vast majority of those 4,236 ventures on the slate for write-down, sale, consolidation, or old-fashioned fire sales.

There’s a lesson to be learned here for everyone who tried to milk this cow that refused to stand still and obey their predictions. Imbalances in the market tend to be self correcting—and markets are never as reliable as regulators in keeping markets in check. So, there’s no Sarbanes-Oxley repeat in Clean Tech on the horizon—rising energy prices answer to more than a federal mandate to spend compliance dollars. Take those moral certitudes to the bank.

It also repeats two recurring themes we’re hearing at Consultiq – too many companies chasing too few venture capital dollars, and acquisitions for proven development teams rather than product.

One alternative to venture fundraising is to build the business, and generate revenue – all your efforts should be focused on building a minimally viable product that can start to generate revenue. Once you’ve figured that out, and it is often different from what you thought it was when you started, and wrote your first draft of your business plan, you need to build and extend the product to accelerate that revenue growth and your customer base.

More than ever, in the current environment, entrepreneurs need to self-fund through revenue generation. It’s hard to drop the fund-raising efforts, but doing so will eliminate a distraction and bring clarity-of-mind to your product development effort.

Build the business, generate revenue, grow customers, and note, from the Reuters story, ”Of course, the hottest companies are having no trouble winning new rounds of funding.”

Any Silicon Valley insider will tell an entrepreneur to self-fund or otherwise resist taking outside capital for as long as possible – that translates into a better valuation and a greater retained share of ownership for the entrepreneur. In the Consultiq model, that means pushing hard to the “minimum viable product” milestone, and trying to turn early traction into real revenue. Wouldn’t it be great if the only outside money you needed to raise was a mezzanine round before the IPO?

This Business Insider article astutely  points out how many in the industry have let their eyes off the ball.