Well, what have you done for me lately, right? Investors, less than thrilled with the returns that venture capital funds have been delivering, are taking their money and going home. The number of new funds launching has thus dropped precipitously, and it looks like the industry will be smaller, with fewer players, according to the National Venture Capital Association.

Of course, the next wave will attract many to ride it, and that could be enough to turn the tide (once again).

Noted venture capitalist Bill Gurley of Benchmark Capital speculated this week, on his blog "Above the Crowd," about the near-term future of his industry. In short, it is not very bright. Gurley outlines why he thinks the sector is headed for a catastrophic but much needed contraction on the order of 50%. This is particularly bad for the ranks of marginal VCs who have enjoyed drawing hefty salaries for managing funds that now appear worthless.

But the contraction will be very good for the future of the VC segment. Says Gurley, "We have seen over and over again how excess capital can lead to crowded emerging markets with as many as five to six VC-backed competitors. Reducing this to two to three players will result in less cutthroat behavior and much healthier returns for all companies and entrepreneurs in the market."

Venture capital funds found 612 companies in which to invest $3.67 billion in Q2. Of this, $1.5 billion (41%) was first-time financing, according to a report by PricewaterhouseCoopers and the National Venture Capital Association. This is only slightly ahead of the action in Q1, in which 141 transactions were first-time, and far behind the pace seen earlier this decade.

The biotech sector was the big winner in a shrinking market, with funding up 54% to $888 million over 85 deals. The software business was flat quarter-over-quarter at $644 million over 135 transactions. Investments in internet companies fell 15% to $524 million via 124 deals. Clean technology showed considerable growth, up 15% to $274 million, with 42 transactions closed.

Venture capital funds found 612 companies in which to invest $3.67 billion in Q2. Of this, $1.5 billion (41%) was first-time financing, according to a report by PricewaterhouseCoopers and the National Venture Capital Association. This is only slightly ahead of the action in Q1, in which 141 transactions were first-time, and far behind the pace we enjoyed earlier this decade.

The biotech sector was the big winner in a shrinking market, with funding up 54% to $888 million over 85 deals. The software business was flat quarter-over-quarter at 4644 million over 135 transactions. Investments in internet companies fell 15% to $524 million via 124 deals. Clean technology showed considerable growth, up 15% to $274 million, with 42 transactions closed.

Taking a cursory look at the headlines, it seems that the venture capital (VC) business is in dire straights -- and that it will take some time for things to improve. All in all, the mood is grim.

Or is it? Perhaps this may be the ideal time for VC deals?

This appears to be the case with legendary dot-com pioneer, Marc Andreessen, who cofounded Netscape. You see, this week he has launched a $300 million VC fund. Joining him in the endeavor is another Net luminary, Ben Horowitz. Yes, the fund is called Andreessen Horowitz.

The venture capital (VC) industry demonstrated its commitment to the clean technology space in the second quarter of 2009, pumping $1.2 billion into the sector, according to a report by GTM Research. VC investments in cleantech are up 43.5% from the first quarter of the year, when $836 was put into play in the cleantech space.

The number of transactions increased, as well. In the first quarter, 59 deals were completed, and deal-flow surged 44% to 85 in the quarter just finished. Average deal size remained fairly consistent: $14.2 million for the first quarter and $14.1 for the second.

Times are particularly tough for VC funds. The IPO market is a ghost-town. M&A is muted -- with fairly low valuations. By all accounts, it looks like the returns for VC funds will be dismal.

But, interestingly enough, this is likely the best time to start a VC fund. After all, it takes several years for startup firms to get critical mass. Plus, it's easier to structure juicy terms on deals.

From 2003 to 2007, VCs had little trouble raising capital for their funds. During this period, the amount raised spiked from $10.6 billion to $35.5 billion.

It's kind of curious, actually, because during this time venture deals have lagged. The primary reasons include the lackluster IPO market and muted M&A environment. Perhaps those who invest in VC funds were being patient. Hey, aren't these vehicles long-term?

Well, maybe not. If anything, it looks like investors are backing off. According to a report from the National Venture Capital Association, there was a 21% drop in VC fundraising last year. The total was about $28 billion.

In fact, VCs raised a mere $3.4 billion in Q4. Simply put, investors are looking for liquidity – and this means avoiding VC funds.

Interestingly enough, it's mostly large funds that are getting dollars, such as Accel Partners (which got a cool $1 billion). This means that there will likely be more focus on larger deals, crowding out the smaller ventures.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Streetsmart Guide to Short Selling: Techniques the Pros Use to Profit in Any Market. He is also the founder of BizEquity, a valuation website.

From 2003 to 2007, VCs had little trouble raising capital for their funds. During this period, the amount raised spiked from $10.6 billion to $35.5 billion.

It's kind of curious, actually, because during this time venture deals have lagged. The primary reasons include the lackluster IPO market and muted M&A environment. Perhaps those who invest in VC funds were being patient. Hey, aren't these vehicles long-term?

Well, maybe not. If anything, it looks like investors are backing off. According to a report from the National Venture Capital Association, there was a 21% drop in VC fundraising last year. The total was about $28 billion.

In fact, VCs raised a mere $3.4 billion in Q4. Simply put, investors are looking for liquidity – and this means avoiding VC funds.

Interestingly enough, it's mostly large funds that are getting dollars, such as Accel Partners (which got a cool $1 billion). This means that there will likely be more focus on larger deals, crowding out the smaller ventures.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Streetsmart Guide to Short Selling: Techniques the Pros Use to Profit in Any Market. He is also the founder of BizEquity, a valuation website.

After the dot-com implosion, there was much talk about the death of the venture capital (VC) industry. And, while there was some pain, many firms survived. But the death may have only been delayed.

VCs need to generate substantial returns for their investors. Even though there have been some winners – such as Google (Nasdaq: GOOG) and Salesforce.com (NYSE: CRM) – there hasn't been enough activity. Simply put, the IPO market continues to deteriorate and M&A transactions are trailing off. Hey, there were only six VC-backed IPOs in 2008.

So, with thousands of VC firms in the market, it appears that the industry is poised for a Darwinian shakeout, according to the FT.

However, this doesn't mean that VC fundings will go dry. Basically, top firms will continue to do deals, but the approach will be more cautious and certain categories will get starved (such as social media and Web 2.0).

What are some hot spots? Well, according to the NY Times, the areas include web-based software, cloud computing, virtualization, open source and clean tech. Also, new companies will need to go beyond advertising revenues and expand their business models to areas like subscriptions.

Yes, as the recession continues, expect fewer free Net services.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Streetsmart Guide to Short Selling: Techniques the Pros Use to Profit in Any Market. He is also the founder of BizEquity, a valuation website.

After the dot-com implosion, there was much talk about the death of the venture capital (VC) industry. And, while there was some pain, many firms survived. But the death may have only been delayed.

VCs need to generate substantial returns for their investors. Even though there have been some winners – such as Google (Nasdaq: GOOG) and Salesforce.com (NYSE: CRM) – there hasn't been enough activity. Simply put, the IPO market continues to deteriorate and M&A transactions are trailing off. Hey, there were only six VC-backed IPOs in 2008.

So, with thousands of VC firms in the market, it appears that the industry is poised for a Darwinian shakeout, according to the FT.

However, this doesn't mean that VC fundings will go dry. Basically, top firms will continue to do deals, but the approach will be more cautious and certain categories will get starved (such as social media and Web 2.0).

What are some hot spots? Well, according to the NY Times, the areas include web-based software, cloud computing, virtualization, open source and clean tech. Also, new companies will need to go beyond advertising revenues and expand their business models to areas like subscriptions.

Yes, as the recession continues, expect fewer free Net services.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Streetsmart Guide to Short Selling: Techniques the Pros Use to Profit in Any Market. He is also the founder of BizEquity, a valuation website.

It's admittedly a warning that's been circulating for a long time now without ever seeming to lead to much, but venture buyout investor Terry Garnett sounded another alarm about the unsustainable economics of the VC sector on Wednesday when he said it was "perplexing" that so much money continued to flow into venture capital.

Citing some gloom-and-doom forecasts that the roughly 1,000 venture capital firms operating today should contract to about 100, Garnett said "that's probably not too far off the mark." Garnett, himself a former venture capitalist with Venrock Ventures who went on to co-found the venture buyout firm Garnett & Helfrich, which spins out businesses from global companies, said the venture model simply did not support the $35 billion of new investments that was poured into startups last year.

Behind some of the highest-profile Web 2.0 startups, he said, there were a host of other startup companies receiving funding but generating a lot less hype and standing less chance of succeeding. The result: "an incredibly bifurcated model" in which the very top tier of VC firms do well and all the others lose money.

Continue reading at TechConfidential.com.

TheStreet.com's Jim Cramer says our problems are so widespread, he sees lots more IndyMacs before we're out.

You don't need me to tell you it's awful out there. You don't need me to tell you that there's no quick fix for any of these things. But what might help you understand why it feels so bad this time is that I have never, in my career, seen so many companies go off track at the same time. This is one unbelievable moment, and it is made more horrible by the day as companies' stocks just get pummeled, causing people to then question the very viability of the companies involved.

First, obviously, are Fannie Mae (NYSE: FNM) (Cramer's Take) and Freddie Mac (NYSE: FRE) (Cramer's Take). We don't know what will happen, but we do know that their futures are much darker than their pasts. Their best hope: a Democrat becomes president and shows the usual love to both. But as investments, they are pretty much perma-losers going forward. The losses are that heavy. Yes, it is true that two years from now they will be better, but will the government let them limp through to that? View them as calls on a Democratic win.

We all know that Citigroup (NYSE: C) (Cramer's Take), Wachovia (NYSE: WB) (Cramer's Take), Washington Mutual (NYSE: WM) (Cramer's Take) and National City (NYSE: NCC) (Cramer's Take) are in trouble. Bank of America (NYSE: BAC) (Cramer's Take) says it isn't in trouble, but obviously the market doesn't believe management because the stock failed to rally when it said its dividend was safe. Any short-selling hedge fund could hire 30 actors and have them line up at a Washington Mutual or two and get a bank run going. Then we would have to hear about a "hasty" Treasury department plan to bail out WM. Hasty? How can these guys not see it coming?

TheStreet.com's Jim Cramer says recent downgrades are killing whole industries, and they're coming at a terrible time.

You can't lose autos and aerospace. Yet that's what's happening. The devastating aerospace downgrade by Goldman yesterday had pin action galore, wrecking everything from United Tech (NYSE: UTX) (Cramer's Take) and Parker-Hannifin (NYSE: PH) (Cramer's Take) to BE Aerospace (NASDAQ: BEAV) (Cramer's Take). It took the whole frame down with it and made everything toxic. And it happens at a terrible time. It isn't like Honeywell (NYSE: HON) (Cramer's Take), which with a few days left in the quarter can come out defending itself. Goldman rolled a perfect strike.

And now the bowlers are back for more with an equally devastating "sell everything" call based on GM (NYSE: GM) (Cramer's Take). Once again it is seamless: Lear (NYSE: LEA) (Cramer's Take) and Tenneco (NYSE: TEN) (Cramer's Take) get jettisoned too, but you know that Visteon (NYSE: VC) (Cramer's Take) and American Axle (NYSE: AXL) (Cramer's Take) and Johnson Controls (NYSE: JCI) (Cramer's Take) and BorgWarner (NYSE: BWA) (Cramer's Take) -- the good ones! -- go down with the car.

GodTube has reportedly received a $30 million investment from hedge fund GLG Partners, according to PaidContent. The news came on Sunday, unsurprisingly.

GodTube is a quickly growing Christian online video sharing and social networking website and previously received $2.5 million in funding, some from private investor Norm Miller of Interstate Batteries.

The site now has 2 million users per month and was launched less than a year ago in Dallas. CEO Chris Wyatt formerly acted as an executive producer at CBS.

While $30 million sounds like a massive amount, the costs of broadband make it a normal investment for comparable video sharing sites. Recently, GLG invested in digital media companies Glam Media and Spinvox. This round of funding for GLG Partners is $150 million.

Also according to the article in PaidContent, GLG Partners and GodTube each declined comment on the rumored investment.