This effect is exacerbated when the entrepreneur seeks financing in a crowded field and has not allowed enough time to go through the traditionally longer-than-expected process of raising capital. Now the entrepreneur seeks money in limited supply and has limited time to strike a deal. The price just went up! Aren't those economic realities annoying?

I once tried to go to a group of angel investors in Utah to raise $600,000 in equity financing at a $1.8 million pre-money valuation. The group liked the business but laughed me out of the room at those terms. We had to come back on a convertible debt deal at one-third that valuation. But on those terms we raised more than $700,000 and the business took off. It became a cash cow that never had a problem meeting the debt service. Few of the investors ever converted, and those owners and debt holders who stayed with the company eventually reaped a monetary reward.

As Utah matures in its venture ecosystem, more investors will be in the game. Then, and only then, will the terms change to favor the entrepreneur. Until then, be careful about wasting years of your competitive and first-mover advantages waiting for investors to change their tune. They won't until they have to do so. In the meantime, be tough as you can be in the negotiation but get the money you need to build the next entrepreneurial "rocket ship to the moon."

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John E. Richards is associate director of the BYU Center for Entrepreneurship. He can be reached via e-mail at cfe@byu.edu.