In December, Forrest Fleming went fishing in Dubai.

Fishing for money, that is. Fleming heads Santa Barbara-based TrueVision Systems, which invented a 3-D projection system for surgical microscopes.

The young 20-employee company was wrapping up its first year of revenue; it had pulled in $1 million. Fleming went to Dubai looking for investors for a second round of financing.

TrueVision had garnered about $7 million to get itself off the ground. It now hopes to raise between $5 million and $8 million. Though the firm has a product, revenue and customers, Fleming said fundraising remains “the biggest question mark.”

He is not alone — venture financing has gone into a deep freeze.

In the fourth quarter, U.S. venture capital funding plunged 71 percent from the year before, from $11.7 billion to $3.4 billion, according to recent reports from the National Venture Capital Association and Thomson Reuters.

But TrueVision has what many start-ups don’t: a product, customers and revenue. It has sold 14 of its devices, which go for about $100,000.

It sells them on a “try and buy” basis, and 30 more devices are in trials at hospitals, Fleming said. Another 60 or so hospitals are scouring their budgets for money to buy a TrueVision system.

If that doesn’t persuade investors, Fleming points out that it took only five years and $7 million to reach a $1 million in revenue – not a bad record in the world of tech start-ups. “If we didn’t have those two things, I’d be very concerned,” Fleming said.

Already Fleming has seen interest from abroad. While in Dubai, he sold two systems to Middle East customers, one of whom paid the $100,000 upfront. “They were wiring us money,” Fleming said.

TrueVision has also seen interest from China, where it might form a joint venture.

“Their need for health care is going to explode, and they’re spending a lot of money on medical infrastructure,” Fleming said. “In 2008, we didn’t really pursue international markets, but they made their way to us.”

All this comes as TrueVision prepares for broad shift in its business model over the next few years. It’s gearing up to go from a hardware company to a software company, to “morph from Dell Computer to Microsoft,” as Fleming puts it.

Here’s how. TrueVision’s system projects 3D images taken from a stereo microscope during brain, eye, spine and other surgeries. A projector displays the images, freeing surgeons from peering through tiny eyepieces and letting others observe the work.

That’s a valuable teaching tool. But the breakthrough is that the images are rendered digitally. That means the software can annotate and manipulate them to help surgeons do better work.

“That’s really the whole ball of wax – improving patient outcomes in a clinically proven way,” Fleming said.

The revenue model: TrueVision will keep selling its hardware systems, of course, but the continuing money stream will come from charging a per-procedure fee for using its software.

TrueVision is working on its first package for release in late 2010. It’s a toolset for eye surgeons.

Here’s one example of what it can do. Cataract replacement lenses can correct astigmatism if the surgeon places them correctly. The surgeon needs to know where the center of the pupil is.

But the pupil, which is dilated during surgery, doesn’t expand evenly. Using a powerful computer, TrueVision’s software can overlay an earlier image of the eye with an undilated pupil. The software locks to two images together, showing the surgeon the center of the pupil.

Future software will integrate 3-D MRI data. It could even alert brain surgeons when cutting instruments near a hidden blood vessel.

The aim, said TrueVision Vice President Robert Reali, is to give surgeons “the ability to see around corners.”

Are you a subscriber? If not, sign up today and get four free issues of the Pacific Coast Business Times!