These days, starting an Internet company is a lot cheaper and easier to do.

Thanks in part to open-source software and little need to reinvent the Internet wheel, a new crop of Internet or Web 2.0 companies are swarming the lobbies of venture-capital firms in Silicon Valley.

Long gone are the days when start-ups would need a ton of money to test an idea, often only to see it fail. Free software programs and languages like MySQL, PHP and Python and the ability to lease computer hardware on the cheap are driving a new wave of innovation that requires little upfront costs.

“It’s so much easier and cheaper to start a company,” said Guy Kawasaki, managing director at Garage Technology Ventures. “So many people are doing it. It’s leading to more entrepreneurship than ever.”

During the first dot-com boom of the late 1990s, start-ups were swinging for the fences, trying to create applications or technology that would rival the incumbents. But, these days, starts-up aren’t so ambitious, working largely on the next iteration of an existing technology or idea.

“Someone has done a social network for college students; well, people who own a hamster need the same thing so they just clone it,” quipped Kawasaki. “Before they (start-ups) were trying to create a database that would kill Oracle.”

Kawasaki, a former Apple (AAPL) fellow and mentor to a slew of tech start-ups created Alltop, a one-stop shop for start-ups to get all the news they need on the VC world in one place. The company's site, which is updated constantly, aggregates news on a slew of VC topics.

“Tech entrepreneurship is a shotgun approach," Kawasaki said. "If you look at Google, Apple, Yahoo, Facebook and eBay, at one moment you could have built the case that it was the stupidest idea in the world. Google was the sixteenth search engine, the only ones using Apple computers were banks and universities and eBay sells used junk."

It's not just consumers start-ups are focusing on. The rise of open-source software has also enabled burgeoning companies to go after the corporate market, typically a domain for the technology titans.

Open-source “allows a lot of new creativity to improving services for the enterprise,” said Tim Draper, founder and managing director of VC firm Draper Fisher Jurvetson. “We are very excited about what open source is doing.” Draper pointed to SocialText, which created software for people to manage their work lives and SurgarCRM and OpenSource customer relationship management software as examples.

“The mantra for Web 2.0 is fail fast, scale fast,” added Marten Mickos, chief executive of MySQL, the open-source database company Sun Microsystems (JAVA) acquired in January for around $1 billion. Start-ups don’t have to pay a lot for Web hosting, hardware and software, which lowers the barrier to entry for Internet companies, he said. “Thanks to OpenSource its costs 1/10 of what it use to,” said Mickos.

According to Mickos, in the past innovation had been driven by the major corporations that could afford to pour money into research and development. But, this time, innovation is focused on the consumer which has been a boon for the open-source movement.

“Open source and the Internet are breaking the cliche that the establishment owned innovation,” he said.

Sun Microsystems, which has been trying to position itself as a home for start-ups, offers the Sun Try & Buy program, which basically allows start-ups to try their hardware for free. The hope is that once the start-up grows it will remain loyal to Sun Microsystems. Sun also has a slew of other open-source initiatives, including its OpenOffice.org, which is a free word processing, spreadsheet and database program. Sun said there has been more than 100 million downloads of OpenOffice.

While making it easier to create a start-up is sure to drive innovation, there is a risk that another dot-com bubble could emerge. Who can forget the meteoric rise and fall of dot-coms like Pets.com, which collapsed nine months after its IPO and TheGlobe.com, the online community that famously crashed and burned?

Industry players say there will be a host of start-ups that will have stupid ideas, but from that heap will emerge the next Google or eBay. What’s different this time around is start-ups already have the traffic before they even look for the funding.  

“The new way is to take $50,000 of your own money or your parents' money and program like hell to open up your site. At some point you’ll have a million people using your site and will need money to scale,” said Kawasaki.

From a VC standpoint, he said it’s a good thing because VCs will be able to invest in something that is already proven. On the other hand, it’s bad because the idea is already proven.

“At least you know some dog is eating the food. The bad news is your paying a higher valuation for that information,” he said.