Some time ago The Semantic Web Blog asked some entrepreneurs whose services and solutions are underpinned by semantic web technologies how to tap into whatever venture capital funding is out there (and it’s not all that much — see Part 1 of this story).

Now the money-people have an opportunity to weigh in. Here’s what they think matters for those interested in securing funding, and otherwise seeing their hard work pay off in delivering real value to customers — and to themselves.

▏ Don’t be a tool (but we mean that in a nice way).
The growing market is in semantic web applications – if it feels like a toolset, it’s of less interest, says Thomvest general partner Don Butler. “I’m old enough that my career covered the era when there were companies doing 3rd and 4th generation programming languages like PowerBuilder,” he says. “Some of the semantic technology companies are similar to that building category, and remind me of those days of developmental tools. But ultimately the market for tools is just so big, and for applications it’s more substantial.”

▏ Think business value, not semantic heritage.
Anthony Lee, general partner at ALTOS Ventures, notes that startups shouldn’t think of themselves as semantic web companies. Rather, consider the technology as simply the tool that drives value, such as consumer insights (as Netbase, one of ALTOS’and Thomvest’s portfolio companies does). “The semantic web is kind of like when people used to talk about investing in Java or Corba companies, if you remember that,” Lee says. “But what won were the companies who built software with Java addressing very specific business needs. Is this the time for the semantic web? It could be – it really depends on whether semantic web companies find very compelling, specific applications for something.”

Potential opportunities, he thinks, include everything from managing individual user IDs and profiles online, to helping Wall Street figure which stock to trade based on real-time social media and what’s being saidthere. So, if you’re thinking about creating a killer app, those might not be bad places to start.

▏ Take aim at the right space.
Broad consumer-based semantic search services often are going to have a hard time making inroads against the big guns. Butler notes he’s seen companies aiming to compete with the search giants run out of money before they come close to delivering real results. From a user perspective, their plans had merit, but the advertising angle proved hard to master, and “then creating ontologies for basically everything—there’s a lot of human editing behind that, and how to expand that seems to be too much work to pull off.”

A better route may be to consider enterprise opportunities for semantic search. And one reason is because there is a more obvious monetization model in the b2b world, which investors like to see. At a recent conference on semantic search, Butler says the consumer plays were all talking about audience, reach and download, and the only one talking about revenue and contract sizes was focused on the enterprise space.

▏ Stamp out the noise.
“The massive proliferation of data on the Internet means that we need to solve the signal to noise problem,” says Lee. He points as an example of solutions to solve that to the emerging market for social media listening tools that help companies figure out sentiment in the social web and social media worlds. “But where the semantic web can take that further is not just telling people whether sentiment is positive or negative, but giving people more meaning around what the market is saying.”

The explosion of data is a big theme, says Jim Jen, who agrees that making sense of it and filtering out the noise in a variety of ways is an opportunity for semantic web startups. Jen is director of AlphaLab at Innovation Works. Innovation Works invests in tech companies in Southwestern PA., and its funding sources include the state of Pennsylvania as part of efforts to drive its technology economy. AlphaLab’s role is to help companies rapidly develop their technology, gain user feedback from early product releases, develop go-to-market strategies, and move toward successful commercial launch.

Startup Bueda, which helps publishers get more value out of the ever-growing realms of user-generated content, got its start there. Co-founder Vasco Pedro, Jen says, was able to tie into what Jen sees as the high-level theme of filtering out inconsistencies and redundancies in order for content providers to create categories that they can directly use with their advertisers. “He made a compelling argument to us that a lot of the options right now for matching are still text-based, and that taking a more semantic approach, where you tie into the underlying ontologies, gives you the opportunity to really get greater matching and greater relevancies,” says Jen.

▏ Think about your opportunities to be acquired.
At Microsoft’s venture capital summit a few months back, there was discussion that the software giant continues to be interested in niche targeted search engines that can enhance services like Bing, says Butler. “If a company can get some traction, Microsoft might be interested in picking them up. … I can see that happening comercially much faster than some major attempt to re-architect search.”

▏ Do something with Twitter annotations.
A recent comment to the SemanticWeb Blog on the post, Twitter Embraces Semantic Web With Annotations, Now What About Facebook? , from Julien Nakache — who is doing VC in Europe at Partech International — notes his excitement about how some companies could leverage this. He wrote that he sees opportunities for companies such as AdaptiveBlue, Zemanta, FourSquare and Outside.in to “thrive on top of this new ecosystem since we’ll need someone saying that several tweets are referring to the same entity.”

▏ Do something with Facebook.
Butler says his firm has done a couple of seed investments in Facebook application companies, but at the time we chatted he had yet to see one integrating some form of semantic technology with the social graph you can get there. That might change with the whole OpenGraph ecosystem development.

▏ Be rich, in IP.
One of the things Thomvest Ventures tries to do is focus on companies that have done something that’s difficult for others to replicate. Butler says he’s been surprised to find during due diligence processes that some companies he’s looking into actually have semantic roots. That’s not apparent until you start to dig deeper into how they do what they do — and that secret sauce can add just the right spice.

Jen agrees about the importance of this. “With things on the web right now, there are a lot of companies that are more execution plays with less underlying technology,” he says. One reason Bueda got noticed, for example, was because of the strong technology it had to improve ad matching, content recommendations and search accuracy around user-generated content that would be hard to replicate.

▏ Be a founder-led company, maybe.
ALTOS likes such companies, because founder-led startups are the ones that usually turn out to be much bigger companies (think Microsoft, Dell, Oracle) than those who hire a CEO. That said, you have to be the right kind of founder, which means you have to be a good builder too. “Having a great founder-led company can create sort of an outsized outcome,” he says. They’re hard to find but when investors lock on to the 1-in-100 person who has an inspiring vision and the know-how to turn that into a real business and scale it, magic can happen.

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