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Capital Ideas

What's a VC to do with e-tailers in a market like this? Partners of CMGI@Ventures, backers of many consumer-oriented Web ventures, huddled in New York in April to hash it out. Here's what they decided:1 Make companies go back to relying on word-of-mouth "viral marketing." It's cheaper than TV. Some e-tailers are trying to get out of costly sponsorship deals with portals, too.2 Find ways to branch into B2B markets without abandoning consumers. CMGI-backed CarParts.com now targets repair shops as well as do-it-yourselfers.3 Raise more money from private investors and less in the public market. Furniture.com, a CMGI company, is considering a private round in lieu of an IPO.4 Don't rely on public relations firms, which can command up to 2% of a startup's equity. "Hype doesn't build great companies," says CMGI partner Brad Garlinghouse. "Great companies build hype." Execution is especially critical now.5 Don't be afraid of the best consumer-oriented deals. CMGI just funded Dialpad, a consumer Internet-phone venture, in part because of its low marketing costs.


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