Bill Gurley On Dot Com Recovery

Benchmark Capital's Bill Gurley writes about the dirty little secret of consumer focused web companies: they're turning surprisingly profitable:

Don't look now, but many dot-coms are working. While most industries struggle to swallow the overwhelming effect of a prolonged lethargic economy, consumer Internet companies are just now hitting their stride. While telephone companies are still reducing capital expenditures, and enterprise CIOs have cut their budget "another" 10 percent, consumers are spending more and more dollars online. If you are convinced that there is no growth in this pathetically slow economy, perhaps it's because you turned your back on these remarkably silly dot-com businesses.

Bill goes on to describe a number of consumer companies in the Benchmark portfolio doing well including Epinions, which was co-founded by VentureBlog's own Naval Ravikant and also has an investment from August Capital.

Many of the higher profile disasters of the late 90's were venture backed consumer companies and that clearly left a bad taste in the mouths of most VCs. On the other hand, quickly think of five internet companies that currently trade for multi-billion dollar valuations. I'll bet you at least three of them (and more likely four or five of them) are consumer companies. Consumer facing companies are more difficult to build to scale and are no longer within the typical venture investor sweet spot. But when they succeed, they do so with large valuations.