The relationship between startups and venture capital companies has changed in many ways during the three years of downturn.

Venture capitalists cut their own staffs, leaving fewer partners to evaluate deals. Those still employed by the VCs concentrated on fewer, larger deals or outright buyouts of established companies.

The VCs busy themselves making the kinds of management decisions once made by the startups' CEOs. One very promising Austin startup essentially is being managed by two of its venture capitalists, veterans of the chip industry who sit on the board. When an important position is to be filled, these VCs call the shots, often bringing in former business associates. The CEO in these cases largely endorses the decisions of the VC board members, instead of the other way around.

With the VCs more engaged in the day-to-day, they have less time to talk to prospective companies. The people who want to start a new chip company are forced to spend even more of their time going door-to-door just to raise money. A startup's CEO does not have enough time to devote to staffing, product creation and other jobs that compete for attention.

Those startups that do get money are kept on extremely short leashes. A company might get a few hundred thousand dollars from each of three VC firms, just enough to last for a few months. These smaller increments of funds, or stanches, come with objectives that must be met if the startup hopes to get the next infusion a few months down the line.

Then there is the bigger question: Will systems companies such as Cisco be willing to buy parts from startups that live in such tenuous funding environments? If money is being parceled out in such short-lived bundles, who knows whether the startup you just spent hours evaluating will get through the next round of objectives, let alone to its B round?

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