With Strong Growth, Web Consultants Find Favor Among Venture Capitalists

About the last thing a venture capital firm expects these days is a request to fund a Web-consulting company. But sure enough, one firm recently received three requests. While this firm passed, others are still open to funding these sorts of ventures.

Why would a venture capital firm put money into a sector that's been battered by warnings of weak financial results? Two answers. First, there's still some belief in the sector's long-term prospects and the current environment makes it cheap to invest. Second, venture capital firms still have money they need to put to work.

"Historically, this has been a good growth sector, generating both revenue growth and cash flow," says Thatcher Thompson, an analyst at Merrill Lynch. "The long-term trends suggest there will be considerable IT [information technology] services spending for a long time to come." ...