The Growth Enterprise Market (GEM) is about to see a fresh round of blood-letting in the next three weeks, according to an Internet investment expert. A partner at leading Silicon Valley venture capital firm Draper Fisher Jurvetson, David Williams, said: 'I think we are going to see a big shake-out as these companies report second-quarter earnings.' Investors would scrutinise the reports to check how much spending went on, or the 'burn rate'. Those which had spent beyond their means and promises could see their shares punished, said Mr Williams, the former head of Merrill Lynch's emerging markets Internet investment banking division. 'You could see this as beneficial, this separation of winners and losers, which should see a flight to quality,' he said. GEM stocks are required to report every quarter unlike their main board peers, which post results only twice a year. Cost breakdowns would come under particular scrutiny, Mr Williams said. Any sign of reckless spending, such as when Timeless Software was found using 40 per cent of its initial offering proceeds on swanky offices, would be jumped on by investors. 'They can't hide anything in the results,' said Mr Williams, who set up the Nasdaq Stock Market listings of Netease.com and Satyam Infoway. On the positive side, stocks which produced results above expectations could expect to see some retail buying which might lead United States institutional players to re-enter the GEM, he said. With many of the GEM-listed companies at a much younger stage of development than their counterparts on Nasdaq, they were even more dependent on the stock market for funding, he said. 'Yet this is precisely the time the market is closed to them,' he said. The GEM Index lost 3.02 per cent yesterday and is down 55.14 per cent since its launch in March. Despite the problems, Mr Williams remained positive about the sector. 'The Internet hasn't changed, it is still doubling traffic every 100 days, only the sentiment of investors has changed,' he said. However, he admitted retailing over the Internet or 'e-tailing' now looked like a poor business model. 'If you take a low-margin off-line business, it isn't going to become a high margin business on-line,' he said. Despite recent doubts, Amazon.com still had a future, he said, as clients valued its unique services.