Nobody's perfect. This column, in its former home at the

San Jose Mercury News

, once slammed the imminent initial public offering of software maker

NetObjects

(NETO)

because, among other reasons, its initial venture backers had bailed out, it relied too heavily for revenue on majority owner

IBM

(IBM) - Get Report

and it needed its IPO cash to avoid going out of business.

The result? Shares of Redwood City, Calif.-based NetObjects are trading above 27, or more than twice their May offering price of 12. That's impressive even after tumbling from a recent record high of 45 11/16. True, IBM remains a major shareholder and customer, though at reduced levels on both counts. And yes, NetObjects continues to lose money: $5.5 million, or 20 cents per share, on revenue of $7.9 million in the first fiscal quarter ended Dec. 31. And I still believe that a company that isn't expected to hit its break-even point until the fourth quarter of 2001 doesn't have any business being a public company. (Let's not even get started on that last point!)

So, how could I have gotten this so wrong?

First, the company almost had to succeed, simply because it is in such a hot segment. Its existing Fusion product, which accounts for the lion's share of its revenue, is one of the leading software tools used by small and midsize businesses to build Web sites. James Moore, analyst at

Deutsche Banc Alex. Brown

(the lead underwriter of the NetObjects IPO last year), guesses that the overall number of Web sites will grow at 50% annually over the next three to five years. NetObjects' revenue, says Moore, will grow by 40% to 45% annually over three years.

And, more so than many start-ups, NetObjects has managed to deliver on what it has promised. It has slightly beaten the expectations of the friendly analysts who follow it. And quarter by quarter, it has steadily reduced its operating losses. Plus, it got lucky. It was firmly entrenched as a business-to-business software company before the term gained currency and B2B companies took off.

Finally, it was able to seize on a new opportunity to jump into a complementary business -- application service providers. This new trend gripping the software business involves supplying software across the Net on an as-needed basis. With an acquisition, it was able to start up

GoBizGo.com, a site that lets users "rent" its products rather than buy them. The site provides software that is embedded into companies' Web sites in much the same way that

InfoSpace.com

(INSP) - Get Report

has embedded its software into the sites of content providers and wireless operators.

"The best decision we made was to move into the e-services model," says Samir Arora, the NetObjects founder and CEO. He points to relationships with organizations like

OfficeMax

(OMX)

and

Sir Speedy

as examples of how NetObjects aims to make money on small businesses. If customers of small-business-oriented OfficeMax or Sir Speedy sign up for NetObjects services offered over their Web sites, NetObjects gets a cut. This way NetObjects makes money on its customers' customers as well as by selling a software license in the first place.

So NetObjects clearly has survived. The question now is where it goes from here.

Hany Nada, an analyst with

U.S. Bancorp Piper Jaffray

(another NetOjbects investment banker), recently slapped a price target of 60 on NetObjects' shares. That's based in no small part on NetObjects' discount to the price-to-sales ratio enjoyed by would-be competitor

Interwoven

(IWOV)

, a Silicon Valley company whose shares trade for more than 50 times estimated 2001 revenue. NetObjects, in comparison, currently is worth about 15 times Nada's 2001 revenue estimates.

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Careful, though. Interwoven is down 37% from its recent high, as investors have seemingly indiscriminately shaved valuations of profitless highfliers. Similarly, NetObjects' shares are off 40% from their recent high. It seems that investors are comfortable with the company's discounted valuation relative to its sexier competitors. NetObjects has been successful, but there are risks associated with its shares -- just as there were last year.

Building on the BuildNet Thesis

Notably absent from Tuesday's

diatribe on IPO wannabe

BuildNet

was any mention of its competition, which is plentiful.

Among those vying with BuildNet for the crown of maintaining an electronic exchange for the construction industry are:

Cephren

(backed by

Goldman Sachs

and, like BuildNet, a unit of

General Electric

(GE) - Get Report

);

Bidcom

(of which

Internet Capital Group

(ICGE)

,

Oracle

(ORCL) - Get Report

and a unit of GE are patrons); and

Buzzsaw.com

(incubated by software maker

Autodesk

(ADSK) - Get Report

).

Those companies don't show up in the "competition" section of BuildNet's federal filings, presumably because those players aren't concerned only with homebuilding, as is BuildNet. Don't be surprised if some or more of them show up by name in amended filings, assuming regulators would like to see more detailed information, as is their wont. But the level of competition is one explanation why a venture-stage company like BuildNet is seeking to raise so much money -- up to $230 million -- so quickly. A big cash horde is like a scary weapons arsenal -- a good deterrent. BuildNet also has been rather successful at locking up its niche. According to its own estimates published in its filing, BuildNet's aggregate customer base includes homebuilders who account for 43% of U.S. single-family homes built in 1999.

Incidentally, to those who say I've changed my tune on BuildNet since November, when I first wrote about the Durham, N.C., company in

Fortune

, I beg to differ. The message stays the same: big idea, impressive partners and management team, huge hype, totally unproven. What's changed is the environment. B2B already is losing its novelty. Then, the fad was still in its infancy. If the fad stays hot, BuildNet likely will as well. If the fad cools, however, or if many competitors try to go public simultaneously, then the companies with the best hopes for profits will be the ones that succeed.

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.

Edie Yates assisted with the reporting of this column.