The "new, new" post-internet economy is on everyone's minds, not least those of Silicon Valley executives and venture capitalists. Elsewhere it may seem that "new, new" means back to the old way of measuring business success. But the perspective from the "left coast" is quite different to that of Wall Street.

Sanguine may be too strong a word but veterans of the Valley, who have seen several business cycles come and go, believe "this too will pass". Some are even pleased to see the wheat sorted from the chaff.

But the volatility of capital markets is not their top concern. When a group of 25 chief financial officers of high-growth Silicon Valley companies gathered last month at Stanford University, capital market volatility ranked last in the top eight issues that "keep them awake at night", says Mary Driscoll, president and editorial director of CFO Enterprises. They worried more about product demand and their ability to adjust spending to rapidly changing market conditions.

Even as evidence mounts of a rapid deceleration in US corporate information technology spending growth, the primary issue on the minds of executives in Silicon Valley is competition. Last week, Ed Zander, president of Sun Microsystems, warned that earnings for the current quarter would be about half the amount expected just three weeks earlier, although he stressed that his company was continuing to gain market share.

Sun's reaction to the stock market rout that has reduced its market value by about 66 per cent over the past six months is to spend Dollars 1.5bn (Pounds 1bn) on a stock buyback.

Is this just bravado? Do Silicon Valley executives have their heads buried in Pacific sand dunes?

Perhaps not - as long as the likes of Sun, Cisco Systems and other market leaders with big cash reserves can maintain a positive cash flow by controlling expenses. Indeed, their deep pockets give them an advantage over upstart competitors.

But what of the smaller fry? Among the hundreds of ventures launched in Silicon Valley over the past few years, there are certain to be many failures. In the words of Roger McNamee, co-founder of Integral Capital Partners and one of the Valley's top moneymen: "Cream is not the only bovine product to float to the top in a bull market."

"We have a mess to clean up," adds Mr McNamee, who invests in both private and publicly held companies on behalf of clients such as Bill Gates. "There are some 400 publicly traded internet companies, most of which are never coming back," he says. "The decline has really hurt but it was absolutely necessary."

Nonetheless, Mr McNamee is still investing. He focuses on companies that address specific technology trends or sectors - currently these are the "elimination of network bottlenecks and the transition to real-time business applications".

"There is plenty of bandwidth. The issue is to overcome the chokepoints," he says. That means investing in communications equipment companies such as Cisco and Sycamore, as well as start-ups such as Procket Networks, which is developing high-speed network routers. Component investment plays include PMC-Sierra and Broadcom.

Mr McNamee is also a believer in the shift from "batch" computing to real time. This may not sound like a new idea, until you hear him include leading e-business software companies such as Siebel Systems and i2 among the old "batch mode" generation.

His latest pick is SeeCommerce, a supply chain performance management software supplier. Other e-business software companies are also addressing the need for up-to-the-minute business information. Examples include Metreo, which specialises in buy-side e-commerce tools, and diCarta, which is carving out a niche in contract management software.

The main aim is to provide the most recent information to managers in every business department - finance, marketing, purchasing and production - for them to make informed decisions. It is no wonder this technology appeals to investors at the moment. The business tools these companies provide may be key to survival in the face of economic uncertainty.

Nor is it a surprise that one of Silicon Valley's most experienced venture capital investors is participating in the next generation of e-business software.

Don Valentine has a 30-year perspective on Silicon Valley start-up companies. The founder of Sequoia Capital, one of the longest-established venture groups in the region, estimates that his company has examined at least 60,000 business plans over the years. Of these, Sequoia invested in about 600 - among them about "10 great companies". As one of the original investors in companies such as Apple Computer, Atari and, later, Oracle and LSI Logic, he has the benefit of hindsight.

Whether diCarta or Metreo or the dozen or so companies in which Sequoia has recently invested will meet this high standard has yet to be seen. Building a "great company" today is far harder than it was 20 or 30 years ago, Mr Valentine thinks. Yet he and other Silicon Valley venture capitalists continue to spend millions of dollars trying, seemingly unperturbed by equity market investors' disaffection with the technology sector.

After all, this too will pass.

louise@ft.com

Copyright: The Financial Times Limited