If you are looking for investors willing to put money in emerging new businesses, stay away from Washington. It's a town where risk is a nasty word and most of the bankers are interested only in real estate, according to David Gladstone, president of Allied Capital Corp.

"We pretty much struck out in Washington," said Gladstone, relating his experiences in trying to raise $30 million for the new Allied Venture Partnership, a fund that will enable Allied to boost the size and scope of its investments. The Washington-based venture capital firm puts money in young, fast-growing companies, seeking high returns on investment.

Gladstone's odyssey took him through the executive suites of the nation. He met 700 people and did countless presentations. "I wore out 10 pair of pants getting down on my knees begging for money," said Gladstone, who spoke to the emerging business committee of the D.C. Bar Association.

In the end, Gladstone raised $33.8 million, but only $7 million came from the Washington area.

Among the Washington-area companies that rejected his pleas for venture capital monies, he said, were Vepco, Pepco, Washington Gas, Geico, The Washington Post and many of the area banks, insurance companies and pension funds.

"We were turned down by what I would call the elite social set of Washington. We got turned down by the best," he said.

"We even got turned down by a friend," he said, mentioning Atlantic Research of Alexandria. "We put $1 million in the company. . . . We made a lot of money. The entrepreneurs made a lot of money. Got turned down by their pension fund."

Martin Cohen, vice president for finance at The Washington Post, was one of the executives who talked with Gladstone. Cohen commented, "I did not make any evaluation of his fund as to its investment potential. We're not interested in taking passive minority positions. We're interested in operating and developing with control."

The five that agreed to invest, Gladstone said, were Acacia Mutual Life Insurance Co., John Hanson Savings and Loan, the Washington Suburban Sanitary Commission's pension fund, the George Washington University Foundation and Kiplinger pension fund.

"When it came down to really determining what's wrong with local institutions and why they don't invest in venture funds, I don't know. I really and truly can't put my finger on it," he said.

Washington, because of its educational, intellectual and income levels, should be a better town for entrepreneurship, he said. But Washington has only about $70 million in venture capital funds while Baltimore has $400 million to $500 million.

"The local financial institutions are just not entrepreneur-oriented," he said. The banks here in town -- you've heard it a million times -- [say] give me a piece of real estate and I'll make a loan on it. But if it's anything other than that . . . they're just not there. We lack aggressive bankers. . . . "

"We approached all the banks here in town. And we got a pretty resounding no from absolutely every bank in town. . . . "