The simple and painful reality for startups in this economy goes like this: Survive until things pick up, or die quickly and start over.

Mark Peter Davis at DFJ Gotham makes this point in his recent post, The State of Venture: The Ugly, The Bad And The Good.

In this new economic environment, access to capital will become an increasingly important differentiator. If venture investing contracts substantially, a strong balance sheet will no longer simply be a means of staying with the pack, it will increasingly become a substantial advantage, enabling some companies to get way out in front of their competition.

Mark points out that companies with solid funding should be thinking big, albeit cautiously. As competition falters – either showing signs of weakness or dying completely – the companies with solid balance sheets and good funding can execute more aggressively. That means hiring top talent (because more of it will be available), executing more quickly and playing a louder, more dominant market role.

Ultimately, there aren’t many companies with huge amounts of funding and great balance sheets – especially amongst early startups. So what are the alternatives?

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