Acorn, a traffic-manager vendor, was already sampling an OC-48 device and had nearly completed its 10-Gbit/second design when it ran out of cash. Though its technology was sound, the market for standalone traffic managers was not.

Also cash-poor was Entridia, which pioneered the net-ASIC concept. Like Acorn, Entridia could not attract enough customers despite having working OC-48 silicon in hand.

And serial startup killer PMC-Sierra struck again, axing its SwitchOn and Abrizio groups months after whacking the former Extreme Packet Devices and Malleable. After spending more than $1 billion in overvalued stock to enter the classification, traffic-management, switch fabric and voice-over-Internet Protocol markets, PMC is left with only skeletons in the closet.

In the happy-go-lucky days of 2000, venture-capital firms were funding just about any networking-silicon company that walked in the door. Why? Because companies like PMC (and Broadcom and Vitesse) were paying ridiculous amounts for startups that hadn't even taped out a product.

With 20/20 hindsight, we see that many of these startups were bad ideas. In these harsher times, VCs aren't willing to throw good money after bad.

Entridia's problem was a lack of programmability. While some OEMs could accept that, most preferred the flexibility of a network processor.

PMC also pooh-poohed the network processor, trying instead to create a Frankenstein's NPU by stitching together parts from several startups. No surprise that this monster scared away the customers.

Many startups that were funded last year now need more investment. But these underfunded companies can't blame all their troubles on the downturn.

Good startups can still raise money. In the past six months, networking-silicon startups such as Cavium, Internet Machines and Paion have raised more than $100 million in venture capital.

Weak startups will continue to fail. But in the end, successful products will enable successful companies.

Founder and Principal Analyst of the Linley Group, Linley Gwennap recently finished "A Guide to Network Processors, Second Edition" (www.linleygroup.com/npu).