It hasn't been business as usual. Or maybe it's returned to business as usual, depending on how you look at it.

The last few months have been trying for venture capitalists, as the companies they funded have been forced to postpone plans for public offerings in the wake of the sharp drop in technology stocks this spring. Many Internet companies have come back, hat in hand, forcing some hard decisions about which companies to keep backing and which to cast adrift.

Some companies, of course, have simply collapsed.

Business proposals continue to cross venture capitalists' desks by the dozens, most of which aren't feasible. Valuations on Internet startups have come down dramatically, which is good for investors because it now costs less to get a sizable percentage of a given company. But the days of cashing out with a 20-fold gain after taking a company public within two years are over. Now, despite a rebound in tech stocks, the IPO market remains shut for almost everyone.

"Believe me, we enjoyed every minute," said Todd Springer, managing partner at Trident Capital. "But we never invested assuming the market would be (like that) over the long term."

The consensus within the local venture community is that deals are now taking longer to do, as more due diligence is being undertaken and stricter requirements imposed. Forecasts have been adjusted to target public offerings for three to five years from when a company first gets funding. In short, it's what venture capital deals looked like before the heady dot-com days.

"What's come back to the market is a rationality," said Robert P. Healy, vice president of the private equity group at William E. Simon & Sons. "You've got to have a business model that has a sound profit model as well."

The companies that Healy and his peers manage are undergoing a hard reality check. The days of spending untoward millions on dubious and costly advertising are gone. Quantifiable goals of progress are imperative. And there is a distinct possibility that a nurtured company could get acquired for a fraction of its previous estimated value.

"Basically, everybody who started a company felt entitled to venture capital funding," said Ravin Agrawal, a partner in EastWest VentureGroup. "We definitely had a period where entrepreneurs could name their price. One of the things that has happened in the last few years is, (venture capitalists) haven't only funded companies, they've funded concepts. These concepts aren't going to survive. So the only option for exit is to be acquired."

Of course, the acquisition price may be little more than a song. Online retailer eToys Inc., itself struggling with perceptions that it may not make it, bought some of the assets of online party-planner eParties for $1.6 million in shares, and 10 of eParties' staff of 28 were laid off.

The deal was noteworthy because eToys is an offspring of Pasadena incubator Idealab, and eParties the brainchild of rival incubator eCompanies, both of which have sought to turn the venture concept on its head by conceptualizing as well as funding startups. eParties debuted with much fanfare only nine months ago, but failed to attract a second round of funding and was quickly disposed of by Santa Monica-based eCompanies.

Given eParties' high-profile debut, its collapse was observed with some amusement by venture capitalists who doubted the viability of an online business that helped consumers plan parties. When the company laid off many of its staffers two weeks before the eToys deal was announced, an eParties spokeswoman characterized the move as a "transition."

"The joke in the venture community was that 'in a period of transition' is now code for 'dead on arrival,'" one local VC said.

As is often the case in business, one investor group's failed company is often another group's opportunity. And in the current market, companies that have secured funding are trolling for troubled firms in similar niches, hoping to acquire them on the cheap. By quickly expanding through such acquisitions, the companies hope to establish themselves as sustainable entities in investors' eyes when the IPO window reopens. And even if they never go public, well-capitalized companies may find acquisitions attractive if for no other reason than the assets are such bargains.

"I would say that there are companies that would have raised $80-$100 million last winter that are being shopped around in the $15-$25 million range," said EastWest's Agrawal. "CEOs are saying they'd much rather find themselves with something rather than nothing."

Venture capitalists who serve on the boards of several different companies are sounding each other out about prospective tie-ups, gauging which way the wind is blowing and estimating how long a given company might have to survive. Such talk "is literally happening all the time," Agrawal said.

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