A capital infusion of more than US$21 million landed by GiftCertificates.com might be a sign that the venture capital market for e-commerce is thawing slightly, but analysts say funding levels are likely to remain sluggish for the foreseeable future.
GiftCertificates.com received the $21.7 million worth of funding this week from several sources, including Imperial Bank, which is floating the e-tailer a line of credit. Mellon Ventures led the equity portion, with participation from Barron Private Equity. Funding will be used for general operating expenses, technology investments and marketing.
The funding news comes as both privately held and public e-commerce 
companies continue to
fold because of an inability to raise adequate capital -- a trend analysts say is likely
to continue.
"I don't know that this spells a re-opening of the dot-com free-for-all," Venture Economics managing editor Ken Anderson told the E-Commerce Times. "It's more of a recognition that it takes a bit more to get some kind of return now."
Profits Promised
Anderson said GiftCertificates.com recently shifted its focus toward corporate customers, a move that might have helped it get funding.
Chief executive officer Michael Ahern said past success helped his firm land the funding, as did projections that GiftCertificates.com will become cash-flow positive by year's end and probably during the busy holiday season.
"Continued support in today's challenging environment clearly validates our business
model," Ahern said.
The funding for Omaha, Nebraska-based GiftCertificates.com stands out not only because the venture market itself has slowed to pre-boom levels, but particularly because the company is an Internet pure-play. According to Internet VC Watch, GiftCertificates.com was the second pure-play e-tailer to receive any substantial venture funding in more than a month.
800 in the 5th
In early June, 800.com attracted $20 million in funding. It was the fifth round of financing for the Portland, Oregon-based electronics e-tailer, which relied heavily on existing investors for the new financing.
At the time, investor Gerry Langeler of OVP Venture Partners said that the investment was made possible by the fact that 800.com's "continued growth and imminent profitability are assured."
Anderson noted that GiftCertificates.com and 800.com have something in common: long histories.
"Both have been around for some time," he said. "The process of the past nine months or so has been sort of a triage for VCs in which the weakest have been cut out. Now it's about concentrating on getting a few of these to survive to where they can provide a return."
Standing Pat
John Taylor, executive director of the National Venture Capital Association, said that investors are busy nurturing existing companies already in their portfolio.
Many VCs have watched heavily funded companies go public and then fold, with high-fliers eToys and Pets.com as prime examples.
No Outlet
Now, with the IPO market at a virtual standstill, venture backers have to decide whether to invest in a company with a clouded future or leave it to an almost certain death without more financing.
A report released by IDC in April advised venture capitalists to stick by their portfolio firms and to become familiar with the particular operational and competitive challenges each one faces.
"Firms that have two or three rounds under their belt are less likely to be left to fend
for themselves," Taylor said.
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