Sarah Lacy

I started covering venture capital in Silicon Valley in mid-2000, about the time VCs were sweeping their dotcom habits under the rug. I remember doing meet-and-greets with firms up and down Sand Hill Road much of the next year and hearing a lot of, "Well, we never did too many dot com deals, unlike some of our brethren." To hear these guys talk, that whole frenzy was funded by venture capitalists from another planet.

So--"eBoys" aside-- you have to respect Benchmark Capital—a firm that arguably had the biggest hit with eBay and arguably the biggest flop with WebVan. They did clam up for a while, but they never pretended they didn't do ecommerce deals and more interesting, they didn't stop doing them.

So a year-or-so ago when VCs were scouring for some good cash-generating late stage ecommerce deals to get in, Benchmark already had quite a stable. Witness recent IPOs and ZipRealty and investments in several high-profile private companies like Friendster and OpenTable. Benchmark has 15 ecommerce companies in its portfolio now and general partner Bill Gurley expects them to invest between 20% and 40% of the current fund in ecommerce.

And now, they've got a little more expertise. The firm announced the addition of Seattle entrepreneur Rich Barton as a venture partner today. It's a part time position, as Barton is also CEO of a stealth early stage startup called Zillow, which is so far self-funded. He was the founder of Expedia, which he grew to a $10 billion company—yes with real profits and revenues, and he's currently on the board of NetFlix. He'll be the eyes and ears for Benchmark in Seattle and will help vet dot com business plans, and meet with the current portfolio, offering advice when needed.

Expedia and NetFlix have something in common—they both changed whole industries. Do you know anyone who doesn't buy plane tickets online? I don't. And that includes my low-tech parents who have now mastered the nuances of HotWire. In another five years, you may not know anyone who pays late fees either. Barton sees similar opportunities still looming across the net. Media is a big one. "We have all this broadband and I can't get old episodes of Seinfeld on the web. That is wrong and it won't last," he says.

Gurley, for one, gets excited talking about multi-player gaming and, yes, still social interaction online despite some arrows Friendster has taken of late.

Despite all the negative connotations with ecommerce, Gurley asserts that the top five Internet companies, Amazon, Google, eBay, Yahoo and Expedia, produced more returns than top companies in any other industry in venture capital history. And when done right, they can be built quite cheaply. I know we're all wary of Internet hype, but that's a stronger argument than VCs trying to get at consumers through electronics, if you ask me. As Benchmark's limited partners learned, one eBay can make up for a lot of dot coms that over promise and under deliver.

Before it's here, it's on the Bloomberg Terminal.