Knowledge@Wharton has a summary of a session with VC’s on Creative Financing which is available at http://knowledge.wharton.upenn.edu/article/1215.cfm

Some key highlights are:
One way to help finance a company in the early stages is to get customers to pay up front, said Flaschen, and, if possible, get vendors to make concessions to help the company’s revenue stream. “Even before you go out and raise money, ask ‘How can I do this with as little money as possible?’” If an entrepreneur takes less financing, then investors have less control. “The dirty little secret is, it is not a lot of fun to have a VC partner in your business. It is a lot more fun to own a majority stake, or 100%. The more you strive for that, the happier you will be.”

Yet it remains difficult to round these angel investors up. “The process of getting angel money is, in my observation, a little bit like herding cats,” he said. “It’s a confederation of 12 to 15 wealthy individuals who are doing this somewhere between a hobby and a part-time activity.” Angel investors tend to travel frequently and miss meetings, or have trouble following up. “This is a great group to go after, but it can take awhile. You can’t go in there and have a half-hour meeting over breakfast and they write you a check. That happened in the bubble phase, but not now. To get eight of them to all write checks requires many, many meetings.”

Companies should take on more than one source of funding, he said, adding that he likes to co-invest in new companies with other venture capitalists to provide additional “brain power.” “You should try to take a round (of financing) with three venture funds together so that when you hit a problem - and you will hit a problem - you don’t have just one decision-maker.” He suggested that when building a syndicate of investors, companies should look for venture funds that have worked successfully together in the past. Greene also warned that venture capitalists will be as just as involved in a firm they take a 15% stake in as they would with a 50% investment.

A second increasingly important source of early funding for resourceful entrepreneurs is government. Starr noted that the federal government has $2.5 billion available for various small business programs that recognize the need to provide funding for high-risk technologies the private markets won’t touch yet. State and local governments are also getting into the business, with innovative programs to nurture start-ups on the bet they will grow into successful companies that can provide jobs and enhance the tax base.