When OVP Venture Partners managing director Gerry Langeler started his presentation yesterday at the firm's annual technology summit by referencing the "elephant in the room," everyone knew exactly what he was talking about. The venture capital business is in a serious state of flux.

Startup valuations are plummeting, limited partners are retreating and IPOs are virtually non-existent. But one stat from Langeler really caught my attention: only 15 percent of venture funds have generated a profit since 2001. "Pretty grim news," admitted Langeler.

But the long-time venture capitalist -- speaking to leading technology professionals such as the WTIA's Ken Myer, the UW's Ed Lazowska (more on his cutting remarks here), Silicon Valley Bank's Bruce Helberg as well as many limited partners in the Kirkland venture firm -- attempted to reassure the audience that the setbacks are only temporary. 

"I think that it would be very easy in times like this to get down in the dumps about startups, about venture capital and about the entrepreneurial opportunities in this country and I think that would be a terrible mistake," he said.

And Langeler said people should look to history as a guide, something OVP has in spades since it was founded in 1983. Those early years at OVP were tough, with Langeler admitting that "hardly anybody made meaningful money" in the venture business.

"You were better off in T bills for a long period of time," said Langeler. Then, in the mid to late 90s, everyone started making money as the dot com boom took off.

Langeler cautioned people to not lose site of the cyclical nature of the business:

"If you think that this is the end of the world, I would come back and argue that no what we have here is a cyclical industry. I think we are going to see a tremendous rejuvenation in the venture industry starting, roughly next year ... because the companies that survive this period or get started in this period are going to be coming out of this environment with this incredible amount of pent up demand for innovation and innovative products."

[Flickr photo via BitBoy]