High Tech's Hazy Horizon

While venture capitalists continue to fund plenty of creative companies working on environmentally friendly energy, mobile services and medical devices, they are also branching out to finance more traditional business models.

In its 35-year history, venture capital firm Kleiner Perkins funded such groundbreaking companies as Genentech, Sun Microsystems, Amazon.com and Google. Investments this year include $50 million in YesPPG, a men's shirt factory in Shanghai. The shirt company has no high-tech dreams or breakthrough patents, but unlike many of the ventures Kleiner invested in the 1990s it is profitable.

"In China, there's a big emergent middle class and lot of clothes to be sold," Saffo said.

Likewise, Sequoia Capital, which in the past funded Cisco and Apple during their early years, just bought a $5 million stake in Noah Private Wealth Management, an independent financial advisory firm, and invested in a document-printing business.

It is significantly cheaper to operate a Web venture because many start-ups are being financed with personal credit cards or by angel investors without much cash. Online advertising services also allow Web entrepreneurs to start collecting ad revenue from day one to fund themselves.

"The really big difference between now and 10 years ago is that you can be a kid in a college dorm room and build something," said Darian Patchin, who worked through a number of start-up firms during the first tech boom. "The tools are better, there are easier ways to bring in revenues so you can stay up and running.

"Today, bandwidth and those sort of things are commodities," said Patchin, whose previous ventures either were acquired, absorbed into larger companies or crashed with the bust.

That also means there is less risk involved in investing in the wacky stuff.

Guy Kawasaki, the founder of Garage Technology Ventures and the author of best selling business books, for example, recently put money into a startup that was named "the worst site ever" by a technology news site. The Web site, called Truerumors, lists rumors that are true. The cost to launch the site was less than $13,000.

These days, a purchase bid from Google or Microsoft -- or both, as the two companies in recent months have found themselves in bidding wars over the most promising ventures -- is the equivalent of an IPO. Some of the area's most innovative companies in recent years -- Keyhole, for example, which developed what is now known as Google Earth -- were quickly snapped up by the larger companies before they had a chance to go public.

One reason why an acquisition bid is more attractive than an IPO has to do with new restrictions regarding public companies, said Matt Greeley, chief executive and co-founder of brightidea.com.

"I think frankly that some of the policies out of Washington with Sarbanes-Oxley have screwed up the public markets and the attractiveness of going public," Greeley said.