Is the tide already turning on B2B? If it is,

BuildNet

, a little-known business-to-business company targeting the home-construction industry, may have just missed the wave. In a classic case of unfortunate timing, it chose Monday to file its initial public offering documents with the

Securities and Exchange Commission

. The same day, nearly every B2B "concept" stock suffered steep losses.

From

Ariba

(ARBA)

(down 6%, or $1.7 billion in market value) and

Commerce One

(CMRC)

(down 9%) to

VerticalNet

(VERT)

(down 17%) and

Ventro

(VNTR) - Get Report

(down 11%), it just wasn't the day to be in B2B.

BuildNet is of particular significance to me, because writing about it last fall helped shape my world view of B2B. It was the subject of an early November

column in

Fortune

predicting that BuildNet would represent the good, the bad and ugly of B2B.

To sum it all up, B2B is a very big idea that makes grandiose assumptions and will be a whopping success for a handful of investors, and a dismal failure for many more. Two years ago, this truism applied to all "Internet" stocks. By last fall, the market was saying the same about consumer-oriented Net stocks -- only a few would survive the inevitable shakeout.

Now, it seems, the B2B crowd may be in for the same treatment: a sectorwide stumble as investors come to question whether all those companies can live up to all that hype. Can this group of companies successfully lay claim to what we've always called "business" as its own market segment?

Back to BuildNet. The Durham, N.C., company aims to create an electronic exchange that brings together home builders, suppliers and manufacturers to streamline a hugely inefficient industry. In the words of its SEC filing, it wants to be the "business-to-business e-commerce solution for the residential construction industry." (Extra points for perfect use of buzz language in an IPO document.)

Here then is what to watch for in this young company with outsize ambition that aims to raise as much as $230 million in an IPO later this year.

The 'Trust Us' Phase

The BuildNet Exchange, the company's electronic marketplace, doesn't really exist yet. It only recently began testing the technology, according to its filing, and a "limited rollout" in two cities is slated for the second quarter. BuildNet hopes to conduct a "commercial rollout" in four to six additional markets in the second half.

We've seen this movie before. BuildNet will go to the public-investor well and ask for hundreds of millions of dollars without having the courtesy of proving that its idea works. This can cut either way.

Healtheon

, now

Healtheon WebMD

(HLTH)

, was in virtually the same situation when it went public in early 1999. Like BuildNet, what revenues it did have came from the old-line revenues of acquired companies.

In BuildNet's case, it reported revenues of $85.8 million in 1999 from software sales -- including from a company it is in the process of acquiring -- not from e-commerce. Healtheon's shares took off as it bought medical portal

WebMD

and began to build and market its online system. The shares soared as high as 126 3/16 toward the middle of last year but since have tumbled to 29 1/2, below where they closed on their first day of trading.

The other companies that come to mind of this ilk are

Webvan

(WBVN)

and

HomeGrocer

(HOMG)

, both of which have extremely ambitious plans and scant operating histories, but which have succeeded in raising hundreds of millions of dollars. Oh, and they share a stock price at or below the offering price to public investors, despite seemingly having executed well on the early phase of their service rollouts. In each case, there's little doubt the business model will work; the sticky subject is the valuation.

Again, the go-public-first/demonstrate-the-business-model-later concept was cute for a while. But it's wearing thin.

Gentlemen, Grab Your Shovels

BuildNet is employing four investment banks to sell its shares:

Credit Suisse First Boston

,

Robertson Stephens

,

Salomon Smith Barney

and

Thomas Weisel Partners

. That's dangerously close to the

Herb Greenberg Rule

that five or more investment bankers is a sure sign heft is required to place the shares.

More intriguing about BuildNet is the total absence of "juice" from Silicon Valley. There isn't a Sand Hill Road venture firm to be seen in BuildNet's documents. Instead, its investors include units of

General Electric

(GE) - Get Report

and

Southeast Interactive

, a venture capital firm in North Carolina. But heck, there's undoubtedly still time to recruit a

Kleiner Perkins

or a

Dell

(DELL) - Get Report

, should either august organization want in.

The Great Mark-Up

BuildNet apparently hasn't needed the glitz of Silicon Valley to raise money. Throughout the second half of last year, it hauled in $35.7 million, yielding a valuation of 52 cents per share. Then, toward the end of the year, it raised $107 million at $4.40 per share.

At that same price, it threw a boatload of warrants at home builders and suppliers, in a page straight out of the playbook of

Homestore.com

(HOMS)

, which masterfully achieved buy-in from the real-estate brokerage industry by making its willing practitioners rich. At $4.40, surely not the final valuation for BuildNet before its IPO, this little company that hasn't yet commercially flipped the switch on its electronic exchange is worth $767 million.

The Great Roll-Up

Needless to say, BuildNet does not think small. It has purchased nine companies or business units in a year, and currently has 868 employees. Inevitably, there's an upside and a downside to such an approach. By attempting to raise so much money and by buying software companies with lots of clients, BuildNet is trying to seal the fabled "first-mover" advantage. But such pell-mell growth is inherently risky. Public investors won't know until long after BuildNet has spent its money whether the new company's management was up to the task.

On that note, there is a bright spot. Founder Keith Brown, formerly a home builder himself, had the good sense to recruit managers with big-company experience. Nathan Morton, a former CEO of

CompUSA

(CPU)

, is running the company with Brown as chairman.

President and Chief Operating Officer Bayard Atwood is a former executive with

EDS

(EDS)

, which is building and hosting BuildNet's network.

So much will come together with BuildNet's IPO: the future of B2B, the public's willingness to continue to fund expensive science projects and the prospects for a "vertical," or single-industry, marketplace as opposed to the "horizontal" approach of Commerce One or VerticalNet. Makes you want to pull up a chair and watch.

Nucleus' Small Orbit

Apologies to the many investors craving contact and ticker information for

Midtown Research Group's

MRG Nucleus Fund.

Midtown is a private hedge fund open only to accredited investors. That means there's no 800 number to call and no fund symbol to check online or in the paper.

Scott Sipprelle and his partner, Neil Barsky, speak to a handful of reporters to be helpful and because they like to see their names in print. But they don't do it to tout their stocks (which weren't named in last week's article) or to solicit additional funds. From the reader response, however, it seems that if Sipprelle and friends ever decided to tap the public market, they could.

Adam Lashinsky's column appears Tuesdays, Wednesdays and Fridays. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. Lashinsky writes a column for Fortune called the Wired Investor, and is a frequent commentator on public radio's Marketplace program. He welcomes your feedback at

alashinsky@thestreet.com.