Traditionally, companies go public in a predictable manner. First, there is a seed round of financing from private investors. Next, there are several rounds of investments from venture capital firms, as well as strategic investors. The company will start to sign large customers and build a revenue stream. Then, the company seeks out an underwriter and goes public.

But in the fast-charging Internet market, the traditional way may not always work. One approach to going public is a reverse merger. That is, a company will merge into a public shell, which is already public. The new entity is publicly traded.

Unlike an IPO, there is no money raised in a reverse merger. Rather, smart reverse mergers will involve a private placement of capital. This will help to grow the company. However, since the company has public stock, this can be used as an effective tool for purchasing other companies -- accelerating the growth curve.

One company that has done this in a savvy way is Rare Medium (RRRR) . Several years ago, the company merged into a refrigeration company. The refrigeration assets were sold off and, viola, the new company -- Rare Medium -- became a fast-charging Net company.

Rare Medium is a Net consulting firm, helping companies establish top-notch Web presences. As has been the case with other top Net consultants, pursuing a mergers and acquisitions strategy is critical. It builds headcount, as well as a client base.

Rare Medium wasted no time. The company quickly bought a variety of Web consulting firms.

Now, Rare Medium has clients such as Microsoft, Yahoo! and The New York Times. In the latest quarter, Rare Medium generated $17.6 million in revenues, which was up 719 percent from the same period a year ago. The sequential increase was 55 percent.

Rare Medium also has a venture fund. With its understanding of the Web market, Rare Medium is investing in a variety of companies. But Rare Medium is not a passive investor; rather, the company wants to actively help its portfolio companies succeed. In all, Rare Medium has made $54.5 million in venture investments.

So far, the portfolio is impressive. Examples include: iFace, a developer of online telephony technology; Notus, a unified messaging company; and Deltathree.com, an Internet Protocol telephony company that recently went public.

The demand for Web consulting services seems insatiable. Estimates show that the market will soar from $13 billion in 1999 to $78 billion in 2003. As Rare Mediums gets new customers, it will also develop and spin-off its own portfolio of private companies from its venture fund. It's a very powerful combination, which should result in long-term happiness for shareholders.

- - - - - - - - - - - - - - - - Rare Medium is a successful operating company with a strong venture capital arm. Can we expect CMGI like returns? Discuss it here