With all the craziness going on in the stock market these days, you may be wondering if the glory days of Net stocks are over. The sad fact is, they probably are. But all is not lost: there are still some good up-and-coming stocks to add to your portfolio. While the market seems to be sorting out the dead wood at the moment, good ideas still abound and today's penny stock may well become tomorrow's Microsoft.

One of the best places to look for stock tips isn't the pundits, but the venture capitalists (VCs). Contrary to popular belief, VCs aren't fairy godmothers (or fathers) standing around looking to throw cash at those lucky enough to be granted an audience. They're generally cold-hearted, steely-eyed businesspeople who've got one objective in mind: making mountainous gobs of money for themselves and their investors. I've worked with lots of startup clients though the process of funding and initial development, and I've yet to find a VC swept off his or her feet by a dreamer.

So how do they pick winners? Most venture capitalists see literally hundreds of business plans a week and have to choose carefully whom they want to pursue. Fortunately, the techniques they use aren't all that mysterious -- in fact, most of it is just common sense. Knowing how to look at a new investment with the critical eye of the professional investor can help make or break an aggressive portfolio.

Here are a few pointers culled from the VC community that you can use when considering whether or not to plunk down your hard-earned cash on a new company:

1. What's their point? Does the company appear to have a focused plan? If you can't tell what they're trying to do from their Web site or business plan, there's a good chance they have no idea, either.



2. Do the numbers make sense? You're about to put cold cash on the barrel -- you owe it to yourself to find out. If they're a public company, that's easy: just ask for their annual report. If they're not, get your hands on their prospectus and see if the numbers seem real. If anything makes you nervous, you can be sure it'll make other investors nervous, too -- watch out.



3. Does their concept make sense? Check your gut: does their business plan seem too pie-in-the-sky? If you get an uneasy feeling from the concept, think hard before investing.



4. Do they have patents or other protections on their process? If so, this can really help their chances of succeeding. If you're unsure, check the Patent Office database



5. What's the market opportunity? Is this a distinctive product or service? Does it increase performance in an existing product? Do people really need/want it? Does the idea really excite you and do you think it will do the same for future customers?



6. does the marketing plan look like? Today, there are over 2 billion pages on the Web. How will the company you're going to invest in stand out in this environment? And who's going to help them get noticed? A good advertising or PR agency can make or break a young company. See who's doing the flacking and who else they've worked for.



7. Check out the management team. Do you think they've got what it takes? Are they seasoned veterans with a string of successes behind them or just the college buds of the guy with the big idea? Not that college buddies with no experience can't run a company -- stranger things have happened (think: Yahoo!). A good, seasoned management team just makes success that much easier.



8. Do they have good advisors? A Board of Directors isn't just an excuse to hang out with some overpaid guys in drab suits. A Board puts its collective brainwork together to help steer the company. Who's on their board? Are they good advisors?



9. Finally, do they have the resources to succeed? Building a new company takes money, and if the company you're about to invest in is running out (and has few prospects for more), beware! On the other hand, if they've just secured a $100 million round of financing, you can be pretty confident -- for the short term, anyway.

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