In 22 years of working with venture capitalists, Steven M. Cohen, co-manager of Morgan Lewis’s emerging business and technology practice, can only remember one time when a venture capitalist returned feedback to a presenter and ultimately invested. When the odds are that slim, “how do you get that first meeting and give yourself the best shot at getting a potential investor?” he asked.

Cohen moderated a panel titled, “VC Confessionals: Why We Funded, Why We Passed,” during Wharton’s recent 2012 Entrepreneurship Conference, whose theme was “Turning Painpoints into Opportunity”. In explaining that tagline, the conference organizers noted that “pain has often been embedded in entrepreneurship. The pain of a personal frustration inspired a new venture. The pain, sweat and tears of an idea turned it into a viable business. The growing pains of the startup helped it morph from being in a league of its own, to one in which it became an industry leader. Pain has often revealed opportunity.”

Perspiration has helped, too. As conference panelist Gil Beyda, founder and managing partner of Genacast Ventures, a venture capital firm in partnership with Comcast Ventures, noted: “I like to paraphrase Thomas Edison, who said that genius is 1% inspiration and 99% perspiration. To me, a startup is 1% a good idea and 99% perspiration and execution.” According to Beyda, while millions of people have good ideas, it is not about the idea; it’s about the execution.

Gauging the Risks

To bring an idea to fruition, Cohen reminded the audience of the importance of evaluating various types of risk: the size of the market, the potential for market penetration, the ability to secure financing, adequate technology development, and an assessment of barriers presented by the competition.

All risks are not equal, said venture capitalist Josh Kopelman, who has helped found many companies, including, Infonautics and TurnTide. As a seed stage firm, his current company funds prelaunch concepts. “We bet on the team,” he said. “The bulk of what you are selling in your first pitch is yourself. The investor has to have confidence in you and in your ideas.” Then Kopelman looks at the product and its market through the “lens of the entrepreneur … how you prioritized your key decisions.”

To Beyda, it’s about evaluating the risk-reward ratio. The more an entrepreneur can reduce the risks — including team risk, market risk, competitive risk, product risk, etc. — the more interested his company will be. Also, considering that it is so easy to start many businesses on the web or in the cloud, he asked, “Why not find a technology co-founder and build a prototype?”

Panelist Rob Coneybeer, co-founder of Shasta Ventures, which focuses on mobile and web start-ups, noted that for his firm, “a high quality introduction” reduces some of the risk; “it’s a test of whether you are any good at partner building.” He doesn’t care where you went to school; what he is looking for are “entrepreneurs who understand storytelling to build brand.”

An entrepreneur who fits the model that Coneybeer outlined — i.e., a good storyteller — is panelist Joe Cohen, co-founder and CEO of Coursekit, an academic social network, for which he has raised two rounds of capital to date. “I spend all day, every day, selling to venture capitalists, to recruits, to our team. Everything is sold, not bought,” said Cohen, who came up with the idea for his company when he was a freshman at Wharton. In his sophomore year, he left school to make his vision — a product that gives instructors the tools they need to manage their class — a reality. His ability to tell his story, in a compelling way, was key to his success securing funding. Coursekit’s website describes the company’s product as combining “tools like … file management, communication, and calendaring with social networking features so students can communicate with each other.”

To bring the storytelling process into focus, Kopelman asked the audience: “How many of you have read Stephen King, John Grisham or Danielle Steele?” Many raised their hands. “And how many of you have read those books twice?” The number of hands significantly declined. That was his pitch for, which sold used books and was eventually acquired by eBay.  “I could have said that I was going to create a person-to-person marketplace for used consumer mass media products,” he said.

According to Coneybeer, your story is not a novel; it’s a short story or a two-minute elevator pitch. And in telling that story, he added, you need to talk about your product, not yourself. Your product is a lens for who you are and for your company’s sell.

Other Ways to Evaluate Ideas

For a company that evaluates ideas at the seed stage, Kopelman noted that it is easier to evaluate a “save time” product, such as Uber, which enables users to request a car from their mobile phones, than it is to evaluate a “kill time” product, such as YouTube. “When we saw Aaron Patzer, the founder of [an online personal financial management service], he pulled out his laptop and we understood the benefit that was there. The same was true when we saw Uber.” He added that “kill time” products can make money, but it’s harder to see until after the product is built.

One of the lenses that Coneybeer uses to evaluate products is mobile. Some products, such as Facebook and other social networking tools, are strictly in the mobile environment. Other products have been strongly influenced by mobile, such as Uber or Cherry, which he described as an Uber for car washing. Car washing, he added, is an example of an industry that hasn’t experienced significant innovations for a long time but that is now being woken up by mobile.

As a venture capitalist with a lead limited partner, Genacast’s Beyda uses Comcast’s resources as a lens to evaluate companies for his firm to consider supporting. The companies he does choose to invest in do not need to have any connection to Comcast, but “Comcast NBC Universal is a great platform for diligence,” he said. When Genacast’s executives looked at a fashion e-commerce company, they checked with Comcast’s E! and Style networks; when they looked at a social marketing research company, they talked with the NBC research division.

All the panelists left attendees with one final thought. “The most frequent reason we pass is not because a business is not a good business, and not because you can’t make good money there, but because it may not fit the profile of what a VC is looking for … [in terms of] expected returns or performance or market size,” Kopelman said. “One of the biggest challenges I have is to say, ‘I think you will make a lot of money, but I don’t think I will make a lot of money,’ which is why I’m not going to fund you.”

For Beyda, the last take-away was the need for entrepreneurs to ask themselves the tough questions first. He is surprised by the number of startups that have gaping holes in either their business model or their research. “You have invested your time and life in this. Don’t you want to know the competitive landscape? Don’t you want to know how big this opportunity can be? Aren’t you interested in building some defensibility?”

Coneybeer cautioned the audience to always prepare well for presentations, to make sure they understand their competition, their product and their customer. The better your preparation, the deeper and more interactive the meeting can be, Coneybeer noted, adding that he spends at least 40 minutes trying to understand each idea and or product he is asked to review.

The conference ended with the straightforward advice of recently minted entrepreneur Joe Cohen: “In starting a company, there are a few things you need — a new idea, a team, product, capital. You need all these things. What happens is because you don’t have one, you don’t do it, or because you only have one of out of three, you don’t. There is inertia, so you go to school or do something else. What I found is that these are excuses.” In the words of a famous Nike advertising slogan, Cohen’s parting words were: “Just do it.”