2009 Venture Capitalist Predictions by stage of investment [Source: NVCA]

This is hardly a shocker. Ninety two percent of the venture capitalists polled in a recent survey by the National Venture Capital Association predict that investments will decline next year, while more than half of the 400 respondents said the investment total will drop by more than 10 percent. Nearly every VC also said it will be harder for new companies to attract financing and more difficult for them o sustain existing companies next year.

That's hardly a rosy outlook. And NVCA president Mark Heesen hammered that point home when he said in a release that "2009 will be a year of anticipation for the venture capital industry as the economic turmoil will engender a fair amount of Darwinian change.” Darwinian change? In other words, it is the survival of the fittest.

I've been informally conducting my own survey of VCs, lawyers and entrepreneurs around town.  The message I am hearing is not pretty, with one VC saying that nearly everyone is hunkered down. Long-time tech entrepreneurs such as The Cobalt Group's John Holt and Jobster's Jeff Seely have told me recently that it is about the worst economic environment they have seen.

The general feeling is that the capital markets may be shut for another 12 to 18 months, meaning that startup companies will have to learn to exist on the fumes of their previous venture rounds or get to profitability sooner than anticipated.

A few courageous investors are placing strategic bets on new companies, following the maxim that the best time to invest is when everyone else is too afraid. (I've been hearing about some activity at Madrona, Voyager and OVP.)

But, for the most part, deals are harder to get done. No one even talks about the possibilities of an initial public offering anymore, so it is not a surprise that the NVCA report indicated that 72 percent of VCs do not expect the IPO market to open until 2010 or later.

A couple lawyers I talked to recently said they are super busy trying to close deals before the new year, but some of these are deals where buyers have swooped in because of low valuations at startup companies that don't want to try to raise another round of capital next year.

Meanwhile, the layoff news has cooled a bit as readers of our "Pink Slip Watch" have noticed, though this could be a case of companies not wanting to cut staff this close to the Christmas holiday.

Other points from the survey:

--81 percent of VCs predict that the economy will stay the same or worsen next year.

--15 percent predict that the Dow Jones index will top 10,000.

--87 percent say acquisition transaction values will decline.

--85 percent say institutional investors will cut allocations to VC funds.