Some of the afflictions of capital market crisis and the tech crash can be attributed to "the unbearable lightness of the launching of a startup".

Too many hopefuls were knocking at investors' doors trying to raise cash to launch projects. The result of the fierce competition between investors greedy for immense yields led to the establishment of enterprises making products for which demand was zero, by people who had nary a smidgen of management capabilities.

"The failure ratio among startups has always been high. The market crisis will only make it higher," says Amir Gal-Or, a managing partner at the Infinity VC fund and chairman of

Partners500

.

He believes the commonly quoted 1:10 failure ratio is not representative of the true extent of the successes, which is in fact smaller. Yes, smaller.

"In recent years firms were established on a tremendous entrepreneurial urge that had been repressed for years and was suddenly legitimized in spirit, but not by real customers in the market," adds Yossi Hasson, a board member and co-founder of Partners500. But the times are a-changing and capital has become scarce. Suddenly employees choose to stick with the major companies.

"Getting good people to join a young company is becoming very tricky," Hasson says.

In the past, launching a startup and finding financing for it was a breeze. This resulted in too many startups with a very high failure rate. Now resources are dwindling and investors are pickier. Investors cannot afford to pamper wacky startups with unlikely prospects.

Prettying the stats

Partners500 was established precisely in order to change the painful 1:10 ratio of failures.

A week ago the company announced the onset of efforts to locate, map, invest in and launch technological startups. It acts as a filter for VC funds and international technology companies, and it claims to provide market reference, human infrastructure and services to projects and technologies in the early stages of their establishment.

"We will be able to provide a breakdown of each technology type, of both the technological needs and of the R&D plans most likely to spearhead the market," says Gal-Or.

Partners500's managers don't say they will do this on their own. They will lean on a massive network of connections they have established with international IT and technology giants, such as

Microsoft

(Nasdaq:MSFT),

Oracle

(Nasdaq:ORCL),

Compaq Computer Corp.

(NYSE:CPQ),

Hewlett Packard

(NYSE:HWP), the

Broadcom Corporation

(Nasdaq:BRCM),

Sun Microsystems

(Nasdaq:SUNW) and a great number of other companies.

"These partners will define for us, periodically and on demand, the map of their future needs, for a period of two to four years ahead," Hasson explains. "We are talking about technological needs of the market, as well as a mapping of the areas the partners would best prefer to invest their money.

"This is an exceptional ability for anyone interested in establishing a company in order to fulfill a proven market need. It's also a rare ability, seeing that no research company can or wants to provide such long-term forecasts."

Networking with the giants will bring Partners500 the personnel and know-how any startup needs. "The main goal is to help investors and entrepreneurs identify market needs... and to develop products not based on hunches but on the information collected by their business and technology departments," says Gal-Or.

Gal-Or and Hasson agree that other VC fund managers are also well networked within the global technological giants. But they claim these connections are of random nature, and lack a tidy analytical focus.

Partners500 promises to help entrepreneurs build their strategic infrastructure and teams, and raise funds.

"We know who should sit on the board of directors of each startup, on its advisory committee and who should act as mentor, and we have the ability to put them there. We have unique contracts with service providers, such as lawyers, bankers and leasing companies which are all at our disposal," they say.

The Internet website the company operates will become, hopes Partners500, a source of information and a forum for hi-tech people, entrepreneurs and companies who are in the business of information technology and communications. The website provides content and services in the areas of fund raising, human resources, market research, legal aspects etc., together with experts such as the international accounting network Deloitte & Touche,

Benchmark Capital

,

IDC

and the Silicon Valley Bank.

"To get this content all you have to do is register on our website. Our database will also include potential entrepreneurs and workers to man the successful companies of tomorrow," Gal-Or explains.

Down-to-earth partners

Partners500 intends to be considered a founder of all the startups it selects. Indeed, it will be establishing some companies itself, by getting one or more entrepreneurs to work on ideas.

Some of Partners500's potential entrepreneurs will receive grants from the company of up to tens of thousands of dollars, and will remain working for the company until the startup idea is formed as well as after it is launched.

According to Partners500, certain services tendered to the portfolio companies will be charged for in cash, but options will be accepted as payment in case the startup team is interested.

Partners500 was founded in 1999 by Amir Gal-Or and Yossi Hasson, a Partners500 board of directors member as well as an investment and acquisition manager at Intel U.S.

To get the ball rolling, Partners500 raised $2.2 million from investors in Canada and the U.S. The proceeds will be used to fund day-to-day activities and to invest in some of its startups.

"The establishment and the co-operative efforts were a lot easier than we had originally anticipated," says Gal-Or. "There are a lot more people out there available to work, and they are not as haughty as used to be. And above all, they all see the need and the potential of the kind of help we offer them."