Money's good, but smart money is better. And for budding technology companies, it could mean the difference between success and an early death.

That's why Ottawa is becoming home to a growing number of "mentor capitalists" -- financiers who include a lot of guidance with their investment dollars.

The newest one in Ottawa is Eagle One Ventures, run by two former executives of Newbridge Networks Corp. Ken Wigglesworth and Conrad Lewis will focus on accelerating the growth of early stage networking firms, giving both advice and early stage financing.

They're joining others who have been putting smart money into Ottawa technology firms. Reid Eddison, Venture Coaches, Skypoint Capital Corp., StartingStartups and others have helped establish this new niche of financiers whose involvement extends far beyond financing.

These mentor capitalists don't just sit on the boards of directors, they're integral parts of the management of a technology startup in which they have invested.

"The money has always been around. But in this particular market what's needed is money with valued-added mentoring services," said Peter Reid, founding partner of Reid Eddison and a veteran of the Ottawa technology scene. "I think the opportunities for people who, like us, can accompany the dollars with high-value mentoring to complement strong management teams is going to be the way of the future."

Reid Eddison, founded four years ago to provide mentoring services to technology startups, has always done ad hoc mentor capitalism; it has put partners' money into seed capital financings at 10 of its 70-odd client companies.

"That was very intentional on our part. We're now looking at ways we can increase the amount of participation we have, bringing smart dollars to the table in combination with the collective mentoring services we provide," he said.

That's the aim of Eagle One Ventures as well, which will launch in Ottawa next week. It has established formal relationships with several venture capital firms and also plans to do its own angel investing.

All this is good news for the hundreds of infant technology companies on the prowl for money in Canada. Even if these companies succeed in finding VC in this dismal market, an injection of money doesn't guarantee even short-term success -- especially if that investor won't follow through with a second-round cash injection when it's needed. That's the position a number of Ottawa startups currently face, as they run out of their first-round money and find it difficult to close a second round.

That frustrates those in Ottawa like Antoine Paquin of BitFlash Inc. who is trying to build companies. He managed to recently close US$15.4-million in second-round money for BitFlash, his third startup. But he has scathing criticism for the "dumb money" VCs that have thrown money at local companies, but won't come back in second rounds to lend additional support to the companies they help to start. "There are a lot of VCs out there like little boys terrified in the corner, pissing their pants," Paquin was quoted in local media this week. "A lot of them invested a lot of money last year on me-too deals, but the real VCs are finding ways to finance their original deals."

Mr. Reid says there's a continuum along which you can place the venture capitalists working in Canada. At one end, there's the "dumb money" that Mr. Paquin decries -- the VC firms that dump money into a company in the current hot sector and hope it pans out quickly. A lot of the money behind the Silicon Valley dot-com boom fell on that end of a continuum, and few of those companies have forayed into Ottawa chasing the hot photonics or network semiconductor companies.

At the other end of the continuum is the Reid Eddison and Eagle One type of companies, whose contributions may or may not include money but always include expertise. "We're long on demonstrated ability to execute on technology knowledge, but we're less about putting the dollars in," Mr. Reid said.

In between are the incubators, accelerators, individual angel investors, and involved VCs such as Skypoint, which was one of the second-round BitFlash investors. Leo Lax, its founder, is the kind of investor every tech firm is trying to attract. "If we don't invest it's not because we don't get it. It's because we get it, but we're not buying it."