We posted late yesterday that Sequoia Capital had called a crisis meeting of its portfolio companies. It gets worse: Valley A-List VC Ron Conway did a similar exercise, although without the in person meeting and gravestone, according to Profy.

The only thing open to debate now is how far the web industry will fall. As we’ve argued over a number of posts, there are positives and negatives from any downturn. Some will survive, and as we’ve said before, and I’d note now supported by Robert Scoble, web advertising may actually increase as advertisers seek more efficient forms of advertising. In that regard, heritage media is in far more trouble than online properties, but that may be beside the point, because nothing will save marginal companies. Those without a solid business plan, who need more VC, or those without VC who will fall. That many existing startups will fail anyway is a given, the economic crisis only hastens their decline, but it’s the cash crisis that has killed the bubble. It’s the fact that many new companies simply won’t be able to find funding, to replace those who fail along the way.

We already have the picture. Google is down over 50%, Yahoo stock is at laughable levels, and although tech companies have fallen at different rates (Microsoft less so due to their stock buy back program), across the board, the decline is verging today on exactly what we saw at the end of the last tech boom. How much further they will fall is something only time will show, but it’s a crash in all but regularly applied label, at least in the tech blogosphere.

The bubble has burst. It’s over.

Even the best case scenario, the economic crisis will still see a significant contraction in the availability of cash, and like it or not, money makes the world go round, including startups. If there’s less money to invest, there is a decline in the startup business. The more likely scenario has the United States in a recession, a rapid increase in unemployment, followed by a rapid decrease in spending, and a serious contraction in borrowing capacity, the last point we’re already seeing now. The idea of a great depression is a stretch, given the unprecedented steps being taken by Governments worldwide to save some semblance of a workable market, but no matter which way you look at every single scenario, the conclusion for the web industry is the same: as Sequoia gently put it: RIP Good Times.

The bubble is over, and although we may argue the exact date it ends for several years to come, let me declare October 9, 2008, as the day we at least realized the truth of our current situation. It’s been fun while it lasted.

Pop goes the bubble.

(img credit: watblog)

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According to reports of the meeting, first reported by GigaOm, and confirmed by VentureBeat, attendees were greeted by a gravestone with “RIP Good Times” written on it. The meeting lasted several hours, and attendees were given a bleak message, including things could get a lot worse than people think, and it will be a more protracted downturn.

Companies were told that they must immediately cut costs, and to figure out ways to survive and emerge at the other end of this downturn, which could last years. Speakers discussed ways of cutting costs across various sections of each business.

Om Malik points out that Sequoia has held an identical meeting before: right before the first tech boom went bust.

There’s opportunities and risks in this marketplace, as we’ve covered previously, and this could be a case of Sequoia being overly cautious, after all, it’s better to make these calls now and prepare for the worst, rather than waiting for it to happen. However, who am I to argue with a team like Sequoia. The sky is falling. Start panicking.

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