You haven't seen the last of the start-ups yet

Q: Why was the dotcom bubble like the Tour de France? A: Because the winner was always the first to get to the capital.

If the past year has shown anything, it is the distorting effects of introducing excessive amounts of capital into an immature industry. Values have been reversed. Where cash was once cheap, it has become king. Where pan-European ambitions were once de rigueur, they are derided. First mover advantage was the prize, now it is the risk. All this only became clear after someone stopped writing the cheques.

The extent of over-supply of capital seems clear. According to the European Private Equity and Venture Capital Association (EVCA), in the first half of 2000 almost 50 per cent of all European investments were made in high-tech, in the unlikely belief that Europe had some 1,700 tech firms worthy of investment. Among publicly owned European internet companies, too, the average market valuation fell during 2000 by 57.5 per cent, says Lehman Brothers, the US investment bank. Whether generated by VCs or public markets, overheated dotcom valuations were the anabolic steroids of the dotcom boom. They allowed start-ups to act like corporates - expand quickly, hire top talent and spend heavily on marketing - without any sweat or preparation.

But like steroids, these muscle-building supplements quickly became self-feeding and, in the worst cases (Boo.com, Boxman, Efdex), fatal. The question now is whether, without the performance-enhancing aid of cheap capital, dotcoms can survive as a stand-alone phenomenon. Or will they simply come to be seen as a catalyst for reform and new media investment within the bricks-and-mortar companies they were supposed to supplant?

The first thing to note is that if having too much cash too quickly has proven dangerous to dotcoms, well-funded corporates are hardly immune. Indeed it could be argued that corporate web ventures are too insulated from the realities of the market. To hear some analysts talk about the "impossibility" of advertising-supported internet ventures, you'd think that Europe's media giants had discovered some better way to fund their dotcom wings.And if dotcoms became synonymous with easy cash, the trend was always inimical to the whole start-up ethos.

Internet firms were meant to be tightly knit teams organised around flexibility, freedom and creativity. There could hardly be a better way to kill these values than by bringing in an external investor seeking a quick return. It is no accident that sectors which did not soak up capital, like computer games development or small-scale web design, have remained largely profitable and coherent businesses, while VC-bloated e-tailers foundered around them.

The past year changed the view of the internet from being a medium in itself to a distribution channel. Distribution is a volume game and, with the exception of niche markets, will inevitably favour big established players. But broadband will change that by putting the emphasis back on compelling content and experiences.

Innovation has a natural tendency to prosper in small environments, which is why even the biggest tech companies such as Cisco and Nortel continue to acquire small, breakthrough technology providers for prices which seem to make no sense.

Start-ups didn't begin with the internet bubble, and they won't end with it either. This race is far from over.

Email Carlos Grande at carlos.grande@ft.com