VOICE FROM THE VALLEY

You want the elevator pitch?" asks Susan Mason. Sure.

OK, then: Onset Ventures is a merger of three large venture capital funds, orchestrated by high-tech execs and VCs who had seen a lot of seed money go to waste. To be clear: They collectively were witnessing a start-up failure rate of almost 80%-only 22% were reaching second-round financing.

A punch to the gut for early-stage investors. Mason: "That's a lot that fail. What makes the others work?"

The founders formed Onset based on two observations about the start-ups that work: They have strong, experienced management. And they constantly revise their original business plan.

That's the elevator pitch, but it doesn't tell you everything you need to know about Onset. Another bit is that sunny Silicon Valley is the place Onset calls home. Meaning: It's seen and been part of the software industry's swells and ebbs. It has a viewpoint new telcos crave.

Some new telcos want to believe it's a good idea to emulate the model of Silicon Valley software start-ups. In which: Star Programmers leave their day jobs and gather backing for a Great Idea, winning headlines and funding along the way, all the while keeping costs low and the aura of mystery high until they sell out, perhaps to a company that actually makes things. Then they sit back and wait for the next Great Idea, so they can do it all again.

Mason, a communications-focused venture investor at Onset, doesn't encourage that fantasy.

"Communications start-up is very different than software start-up. [Carriers] get big fast. They have to get big fast," she says.

More: "In the service [provider] industry, you have to build a killer execution team. You have to hire a lot of people quickly. It's so competitive, especially since the Telecom Act, you do not have time to waste."

And this: "Carriers need to build a lot of equity fast, and venture funds can't supply all of it. Debt financing, and later an [initial public offering], would be the next steps."

It may be a different, more daunting scenario than some entrepreneurs expect, but VCs like Onset aim to bring them down to earth. Then build them back up.

In the beginning: "Two guys come through the door with an idea. It's unusual if they have a business plan, and if they do it's usually wrong," says Mason. With only that much to work with, Onset investors gather their perceptions. Is there an entrepreneurial essence around these people? Are they the top technologists in their field? What's their track record?

>From there: "We incubate them here. Build an execution team around them. >Guide them through every step of rewriting the business plan and meeting >with customers."

Keeping a quick pace is everything. Onset wants to beat the odds and get seeded firms to second-round financing fast. And then, it's on to the revenue stage.

Building the execution team-the initial management team-is critical. Onset keeps an active database of good people in key positions at many different companies. "With telecom, you're talking about a special list of people. We keep our eyes on people, andwe have relationships with all the big recruiters," says Mason.

Another thing: With telecom so competitive now, with many start-up carriers looking for seed money, there needs to be an extra edge somewhere. "What's your unfair advantage? We like companies to have an unfair advantage," says Mason.

Among those that qualify so far: Pathnet, a carriers' carrier based in Washington, D.C. Its unfair advantage looks to be its partnerships with utilities, pipeline companies and railroads that provide rights-of-way for fiber routes. On the vendor side of telecom, Onset also has seeded Accelerated Networks, developer of integrated access systems, as well as Gigabit Ethernet start-up Alteon Networks.

With all the work and all the steps that go into setting up a telco for business, that Silicon Valley start-up model begins to look like a faraway concept. But what about the selling-out part? In a world where the big keep getting bigger, shouldn't that be the ultimate goal of any start-up? Mason thinks new telcos wouldn't be bad off trying to do business rather than just start one. "With telecom, there is an opportunity to become a multi-billion dollar company that is just not there with a software start-up. With a telco, I would keep pushing. Maybe go for an IPO and get out there."