Silicon Valley in survival mode - and virtual worlds?

Leading venture capitalists are inciting Silicon Valley companies to switch to survival tactics. Om Malik on GigaOm writes that

Sequoia Capital, arguably the smartest venture capital investor in business, is sounding the alarm and asking its portfolio companies to buckle down for what could be the worst economic downturn of their relatively short lives.

GigaOm is not the only one to report these developments. Mike Arrington at TechCrunch reports that angel investor Ron Conway, who has backed start-ups such as Google, sent a letter to his portfolio companies suggesting they lower their burn rates.

Are the prospects for the Valley, for web2.0 and virtual worlds companies gloomy?

Rob Hof on Tech Beat sees some positive aspects:

No doubt the Valley, and technology at large, is in for the toughest times since at least the all-too-recent dot-com bust. But I’m not so sure it will be a bad thing in the long run—maybe quite the contrary. So if you see the inevitable stories in coming weeks and months predicting the demise of innovation in Silicon Valley, read them with a heavy dose of skepticism. As any battle-tested entrepreneur will tell you, the bad times are the best of times to start a company that will last.

How bad is this news for web2.0 in general and virtual worlds in particular? Web2.0 as an internet evolution phase won't be too affected, Clay Shirky told us in Amsterdam, because of the fact the capital requirements of a typical web2.0 company are much lower than of a typical internet start-up in the late nineties.

Also Chairman Philip Rosedale of Linden Lab did not seem gloomy at all in Amsterstam. Linden Lab is basically a hosting company, with currency trading as an additional source of revenue. The company is profitable and develops new revenue sources in the context of OpenSim.

Or is all this just a denial of the harsh reality? Maybe not. Virtual worlds and games seem to flourish also when times are bad, maybe even more so, because of a certain escapist tendency of the audience. Virtual worlds could also present themselves as part of cost-saving tactics for companies - for instance making it possible to cut travel costs. Projects in virtual worlds have low capital requirements, etc.

Update:Just reading Bettina Tizzy on Not Possible IRL, discussing the same subject. Bettina's opinion:

Not long after establishing residence in Second Life®, I became convinced that a major act of terrorism would prompt millions of new users - cocooning at home out of fear - to begin exploring the metaverse. I am now thinking that the economic crash may have the same effect, only this time because people will not be able to afford most entertainment, travel and other recreational offerings.

What is your take on this?

Roland Legrand