NEW YORK—Venture capitalist William J. Kane remembers “Flex Infusion Inc.” all too well. He spent nearly 40 hours investigating the nascent company’s product, people and plans—and then didn’t invest a dime.

“We liked what we saw, got good feedback on the attractiveness of their technology and the potential of the applications,” said Kane, 31, a senior associate at Harvest Ventures Inc. here. "But we were still uncomfortable with the rate of growth they projected. We felt their cash needs would be greater than they expected.” Also, a financing agreement proved elusive. “So we didn’t do it.”

Scientific entrepreneurs, beware. Kane said such close calls are common when he’s scouting for leading-edge firms in need of cash. These companies, often founded by scientists to market their ideas, may have a revolutionary proposal. But they frequently lack a realistic view of their prospects. That can mean the difference between cold cash and...

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