Female birds, especially the peahen, judge the male of the species by the size and flamboyance of his feathers.

We're not sure why females associate tail feathers with breeding value. But one theory holds that they assume any male with the resources to produce wonderful feathers must also possess other strengths.

In other words, the peahen has no sure measure of the worth of the peacock. So she uses the feathers as a substitute measure. She has engaged in what some technology and Internet investors call "proxy valuation."

Investors in the newer breed of dot-com stocks can't really determine by conventional means the worth of a company that has no profit and little revenue. So instead of looking at earnings, they look at measures such as "page views per quarter," "unique visitors," "questions per quarter," "stickiness" and my favorite, "eyeballs."

How many eyeballs does a Web site attract? If the answer is tens of millions, investors feel more confident the site can attract money, too, in the form of paying customers for something. They speak of "monetizing" the eyeballs.

Now, if the peahen is wrong about the feathers, she can go find another peacock. If the ordinary investor is wrong about an Internet stock and the stock crashes, the money's gone.

So standards are beginning to change a bit. As some companies move from infancy to toddlerhood, investors are starting to look for something other than feathers.

Still, if you invest in the pure Internet sector--about which I'm actually bullish--you're entering a different world than that of traditional stock investing.

Just a week ago, for example, a company called Excite At Home agreed to pay $780 million to a company called Blue Mountain Arts based largely on the number of eyeballs it attracts and the potential for monetization.

This kind of deal illustrates the big concern today, primarily voiced by those who think Internet stocks are a bubble, about neglecting traditional means of valuation. If you apply tried and true tests to most dot-coms--earnings per share, a hundred different ratios of one kind or the other--they fail miserably and you can't buy them.

That's why when you buy Internet stocks you're in a different realm, that of venture capital.

In the old days--meaning before the mid-1990s--venture capitalists financing new companies would never have brought them public for five or six years, and then only if they had serious earnings, like $30 million.

Bill Gurley, of Silicon Valley's Benchmark Capital, says that now the time lag between the venture-capital stage and the initial-public-offering stage has gone from about 6 1/2 years in 1995 to about 2 1/2 years now. It's not because companies now are somehow more advanced. They are still in the venture-capital stage. What's different is that the public is being ushered in early, often to provide funding that the company desperately needs to stay alive. That's what makes Internet stock investors venture capitalists.

Now, venture capitalists think differently than public equity investors. Venture capitalists study a company's management; they study its "business model," that is, its plan for making money; they make judgments about potential competition, and then, if they approve, they throw money--often quite a bit of it--into the breach. They also involve themselves in the management of the company. Sometimes they fire the old managers and bring in new ones.

The companies are babies. If they were grown-ups, they wouldn't need venture capitalists.

No writer I know captures the thinking of Silicon Valley venture capital more brilliantly than Gurley himself, in the widely published and circulated essays he writes called "Above The Crowd." (He's 6 feet 8 inches tall.) You can get to them at www.benchmark. com/about/bill.html.

"Most people view investment consideration as a bilateral relationship in which the investor gathers as much data as he or she can about a particular investment and then judges that data to make an investment decision," Gurley writes in his latest article, "The Importance of Storytelling."

"In this simple framework, investors look at data, and executives try to deliver better data--i.e., increase earnings, revenue, and cash flow. However, this simple model ignores the fact that the executive could instead choose to change the investor's consideration process" by saying, "don't look here, look over there. Why worry about earnings when you could instead convince the world to value your company based on the number of people that live in your service area?"

He credits Craig McCaw, the cellular phone entrepreneur, with the most successful deployment of proxy valuation because he convinced investors that methods such as comparing stock price with earnings and stock price with cash flow were "flawed when evaluating early-stage infrastructure plays."

For venture capitalists, potential value is measured adventurously. Even hype and buzz may count. "The ability to tell a good story to the investment community" about the company heightens value, Gurley writes. Call it hype if you will, he says, but "you must recognize the enormous likelihood for self-fulfilling prophecies. Whoever grabs early mind share typically secures strong financing. Strong financing adds to the story, which then may help enable a killer partnership--once again adding to the story."

Gurley knows whereof he speaks.

The current exhibit is a newly floated company called Webvan--which peddles groceries on the World Wide Web for delivery in the San Francisco area. It wants to go national. Webvan isn't much. It claims $4.3 million in net sales since it opened a warehouse in San Francisco in June. Its projected loss for the year is $65 million. But at the close of trading on Nov. 5, its first day as a public company, its market value was about $8 billion.

But, to quote Reuters, "analysts said hesitations about the company were eased by the well-known names leading Webvan's management and the list of heavyweight backers, including Softbank America Inc., Sequoia Capital and Benchmark Capital Partners--names that are familiar in the world of new technology and Internet firms. Louis Borders, founder of retail chain Borders Books, is Webvan's chairman, and George Shaheen, former Andersen Consulting head, is the grocer's chief executive."

What does all this mean for the individual investor?

Watch out.

Internet companies seeking investors are trying to get you to look "over there." Do look, and make sure there's a there there. I'm not an eyeball man myself. I am ready for good ideas, at least a nice collection of paying customers and reasons to believe there will be more paying customers in the future, more than the competition.

Does your common sense tell you about the potential consumer interest in groceries ordered on the Internet and then delivered? How many people do you know who might use this? If Giant Food decided to compete, with its existing warehouses and buying capacity, could Webvan survive?

Second, there are stories and there are fairy tales.

One of the most hyped stories of the IPO decade, for example, has been that of Theglobe.com, a self-described "community" run by two devil-may-care 20-somethings who, I can personally attest, put on a hell of a road show. They're like stand-up comics, with great punch lines, with one playing the straight man, the other a regular Seinfeld. Like so many Web "communities," we were supposed to visit and stick to their site because we liked them and what they represented.

Theglobe.com was celebrated when it hit $36 a share in April. But now it's trading in the low teens--and headed for single digits, if you ask me.

The same is true for iVillage.com--the women's network--which hit $113 per share in April but is now in the low 20s. That's kind of a disaster for those who bought at the top.

Watch out for analysts who try to persuade you to buy an Internet stock pretending to apply the traditional valuation methods. Except for companies, such as America Online Inc., that make a lot of money, that just doesn't work. They're trying to put new wine in an old bottle.

And keep in mind that you are not a venture capitalist.

The big difference between you and them, besides that they can control the company in question, is that their venture funds can afford to lose huge amounts of money on a bunch of companies because they make so much on their investments in others. This should not put you out of the game, but you, too, should be able to afford the complete loss of your investment if you go in for Internet stocks--seriously.

So put in only what you can do without, should the worst happen.

While you're on the territory occupied by venture capitalists, you are not a venture capitalist.

They've got the feathers. You don't.

Fred Barbash (barbashf@washpost.com) is The Post's business editor.