I don't understand the argument that "less investment means only the better companies will get funded." At best, you would have to say "less investment means only the better companies [according to VC's] will get funded". VC's are probably better at picking companies than disgruntled entrepreneurs admit, but all of them clearly fund more failures that successes.
But I think the most likely result is that "less investment means that only the safer bets will get funded." If there is a general economic downturn and fewer opportunities for a big exit (from either buyout or IPO), than I would think that VC's would get more conservative.
The other key indicator will be the health of the online ad market; if it collapses than you can expect the entire VC/startup ecosystem to collapse. This is why Google's earnings last week were such good news. But even if a downturn in the ad market does happen, maybe that won't be such a bad thing - then everyone would have to listen to DHH!
But I think the most likely result is that "less investment means that only the safer bets will get funded." If there is a general economic downturn and fewer opportunities for a big exit (from either buyout or IPO), than I would think that VC's would get more conservative.
The other key indicator will be the health of the online ad market; if it collapses than you can expect the entire VC/startup ecosystem to collapse. This is why Google's earnings last week were such good news. But even if a downturn in the ad market does happen, maybe that won't be such a bad thing - then everyone would have to listen to DHH!