"This was more than a love affair; this was an orgy. This was crazy. ... In the first quarter of 2000, by the second week in February, venture capitalists, mostly venture capitalists in Silicon Valley, were spending a billion dollars a week, primarily on startups or early rounds [of financing] in startup companies. This was nuts! And this was very expensive for all of us. "- Ann Winblad

This past Spring, many Net stocks tanked, falling 60% and more below their previous values. What happened ?

"For a couple years the rules of gravity were suspended," says Micahel Barach, CEO of MotherNature.com, Harvard grad and former venture capitalist, who had to take a sharp turn and transform his business model from consumer vitamins to a B2B for vitamin stores. "No one worried about the bottom line."

Many were not so lucky. Many companies were encouraged by their venture capital backers to put the pedal to the metal, to spend heavily to gain consumers and to sustain the 40% growth rate their backers demanded. When things turned South on the Net, the money supply simply dried up. Many venture capitalist made the decision to only fund their top portfolio companies and cut their losses on the rest, leaving those other firms high and dry with no gas in the tank. Some companies were shuttered. Others went into Chapter 11 Bankruptcy protection.

The question is, can they come out of it and how? And should anyone still think about launching or even continuing operating a dot com?

This, apparently, is where the Old Economy comes in. What these companies will have to do, so the best thinking goes, is what was unthinkable for a dot com, even a few months ago: they will have to trim costs, particularly ad budgets, actually make a profit in the short term and build the business slowly, at least in dot com terms.

"This was more than a love affair; this was an orgy," said Ann Winblad of Venture Capital firm Hummer, Winblad." This was crazy. ... In the first quarter of 2000, by the second week in February, venture capitalists, mostly venture capitalists in Silicon Valley, were spending a billion dollars a week, primarily on startups or early rounds [of financing] in startup companies. This was nuts! And this was very expensive for all of us. "

This was an orgy, too, for ad agencies, who started telling dot com clients it would cost $25 million to build their brand nationally and immediately, 3 months tops, and that didn't even count the cost of the agency services which were steep. Partly these services were steep because they were, after all, ad agencies, and the marquee names were in demand. But, aside from the economic laws of supply and demand, costs were layered on because of the speed demanded by the Internet.

Because they didn't have time to develop a marketing department in-house, dot coms outsourced the work, essentially hiring an ad agency, not just to place ads or create campaigns but to serve as their entire, ( expensive) marketing department. Setting aside the expsense issue for the moment.... after all, they had money to burn at the moment..... how about the conflict of interest issue? Your ad agency is going to tell you to spend less money on your ad agency? Or to consider a different ad agency? And the ad agencies didn't have time to develop enough in house talent to handle all the graphics, design and engineering so they outsourced it to other firms who had their own overhead. And all that expense was o.k., as long as there was money to burn and, as the venture capitalist's exit strategy, a rich IPO plucked you out of it. But, ultimately, the expense was on the back of the public, or if they hadn't had time to make it to market before April, it was on the back of the venture capitalist." And this was very expensive for all of us," as Ann Winblad said.

But, wait a second. Aren't these venture capitalists the guys who financed these firms to begin with, told them not to worry about money, play now, pay later, put the pedal to the metal? In case any of us have forgotten it..... and I think some of us did, when these guys suddenly had billion dollar companies popping out of the Net at warp speed....... the venture capitalists are human, too. And, it seems, they may be smarter than the next guy, but they, too, can be seduced by the promise of a new technology, bank too heavily on a trend. It was, after all, the VCs who backed 13 or so pet stores, most burnt to a crisp by now.

Recently, Business 2.O had its first salon with Michael Wolff and Kurt Anderson, "two media heavyweights", discussing the recent shake-out and the future of content on the Net. Wolfe, the author of "Burn Rate" and media critic, concludes that if it is going to take a very long time, 6 to 10 years to create a media company in this space, then it will be old economy media companies, not venture capitalists, who are prepared to take the pain and go through the lengthy gestation period.

Another scenario is that established companies with much to gain will fund Net start-ups which support their core business. Palm Pilot, for example, will fund those developing wireless applications or other software or technology which may enhance their product.

And although both of those scenarios may prove to be true, it may be too soon to say the VCs won't play in this market, even if it takes a bit longer. As Anderson says, when surveying the VC world," You've always had dumb money and smart money in every market. Perhaps now you have smart, very smart, and contrarian and brave money and perhaps very, very dumb money as well." We know the VCs are smart. Perhaps now they will have to be very smart, contrarian or brave as well, just as the dot com entrepreneurs have had to put on the brakes and learn to take a page or two from the Old Economy. There's just too much money and too much promise in the Brave New World-dot com-New Economy, not to try to act like a grown up, balancing the fundamentals of the Old Economy, where profit matters, with the brave new World whose boundaries and possibilities we cannot yet fully imagine, but can survive to explore if we pull back and forget only one word:"burn rate."