Want to clear out a conference room full of venture capitalists in a hurry? Throw up a PowerPoint demonstration with a business plan including the phrase "business-to-consumer" and watch them scurry.

The public markets have lately been less than kind to B2C companies, notably e-tailers.


(AMZN) - Get Report

is down 15% so far this year, while



has fallen nearly 50%. And IPOs haven't been doing so well, either: Luxury goods retailer



now trades at about 33% below its offering price, while



had a less-than-roaring debut last week.

By contrast, business-to-business stocks are

en fuego

. Not surprisingly, VCs have noticed the disparity. "Venture is getting more cautious," Keith Benjamin, partner with

Highland Capital

said. "To say B2C now is almost the kiss of death."

But not everyone has left the building. And those that remain -- including Benjamin -- say B2C is by no means dead and buried. "You can look at retailing in the U.S. and the Internet is only about 1% penetrated," Mike Linnert, a partner with

Technology Crossover Ventures

, which has investments in companies including




, said. "We're not anywhere near done."

Evolution No. 9

Those VCs acknowledge, however, that their investment strategies have evolved in several ways. For one, they're not investing in insertproductcategoryhere.com. "Two years ago, we were all walking down the mall saying, 'That should be sold on the Internet,' " Linnert said. "We've tapped out all that. With a one-product site, it's hard to make enough money to cover marketing costs."


sock puppets aside, it's hard to make money shipping commodity products like dog food. Categories like CDs, jewelry, beauty and luxury goods are already stuffed to the gills with Johnny-and-Janie-come-latelies, some of which will go under or be bought by rivals.

Instead Linnert says he's taking a closer look at companies that target a more specific demographic. Dan Rosenberg, an associate with Seattle-based


, agrees. His firm invests exclusively in consumer businesses, and has invested in companies including


TST Recommends


and, more recently,


, a retail site offering athletic products to women. "Lucy has the opportunity to become the leader in its category," he said. "They're focusing on their niche."

Linnert says he's also looking for e-tailers that, to use a term best suited for buzzword bingo, can monetize their customer bases. Simply put, that means to squeeze out some extra bucks by capitalizing on their customers. It's what

America Online


has done, beginning with its long-distance deal with



(then plain old


) in 1997. Now Amazon.com gets hundreds of millions for funneling its 17 million customers to drugstore.com and other sites. Of course, a start-up doesn't have the same clout as an Amazon or AOL, but business models that include more than straight e-commerce are more attractive.

Back to Branding

VCs are also coming to the realization that top brands are likely going to take it all. To that end, "There's some additional interest for retailing spinouts of legacy companies," Benjamin said.

Benchmark Capital

is funding



Softbank Venture Capital

is teaming with



to set up


, an e-commerce company and ISP. And


(WMT) - Get Report

is joining with

Accel Partners

to set up


in Silicon Valley.

Of course, for all this good cheer, early investors do expect to get out. And as much as VCs hopefully point out how portal stocks, too, went through a rough spot before surging again, as long as e-tailers continue their poor performance in the markets, IPOs are going to be tough. Bankers are too busy slobbering over B2B start-ups. So many VCs say that M&A will likely pick up this year, maybe even replacing the IPO as the B2C cash-out of choice.

For now, though, those who still have faith in e-tail are saying a word that's rarely used in connection with the Internet: bargains. "If I find something I love, I can get it at a rational price," Benjamin said. "It makes B2C more attractive to me if no one else wants to touch it."