Buoyed by increasing e-commerce activity, venture capitalists are betting online retailers will rely more on third parties to maintain their sites.

Christmas data, finally dribbling out now, shows shoppers increasingly flocking to web shops, and spending more money online each year—encouraging e-tailers, in turn, to spend more on sprucing up their sites.

To that end, General Catalyst Partners and North Bridge Venture Partners just committed $12 million in a second round of financing to Boston-based startup Demandware. Clever folk, the startup deduced that retailers aren’t, by definition, software developers, so it has come up with a system whereby merchants pay a usage fee and get an on-demand hosted service for their e-commerce site.

They also get an environment that lets them easily customize applications. Stephan Schambach, Demandware’s CEO, says most retailers can’t afford to build, maintain, and continue to invest in an expensive solution, besides which they don’t have the time if they hope to do any merchandizing.

“There are only a handful of Amazons, eBays, and Dells out there. The other 95 percent of the market, those guys with $2 [million] to $100 million in revenue, need a high-end web site,” he says.

E-commerce software maker Venda saw the same problem, but has focused on e-tailers that have already tried other third-party solutions, like Yahoo Merchant Services. Two of its latest Yahoo converts is Crabtree & Evelyn, the U.K.-based bath and bodycare outfit, and Sports Giant.

“We just outgrew them, because we became a very large merchant,” explains Shael Wilder, CEO of Sports Giant, who says Yahoo Merchant Solutions was no match for the IBM platform Venda uses.

Mr. Wilder wasn’t up to the task of site-building himself. “A mid-level merchant can’t afford to put a million up on the barrelhead,” he says. “With a subscription model you pay for what you use, and it looks like, smells like, and tastes like what the big boys are using.”

Hitchcock Twists

Venda’s story has more twists than a Hitchcock film. The codebase that became its e-commerce engine was hatched within Dialog, once a Lockheed property that sold premium content in the Lexis-Nexis tradition.

Venda CEO Jeff Max says Dialog spent $70 million developing the software. Then Canadian information giant Thomson came along and acquired Dialog, selling off that software piece to Venda in 2001. Price: six-figures, Mr. Max remembers. “The price of a really good car.”

By then, the dot-com bust was settled in and Mr. Max kept Venda afloat by taking the company to London, where it built e-commerce sites. Three years later, it was profitable, and Mr. Max made contact with the Southern Ute Indian Tribe, and took $5 million in a first round of financing. Now the company’s customers run 150 separate sites in 11 countries, nine languages, and five currencies.

“The great thing now is we’re seeing CIOs reading the tea leaves and going for software-as-a-service, instead of some startup with a few million dollars trying to glad-hand their way up the ladder,” says Mr. Max.