It's definitely a buyer's market today, whether the asset class is a house, a stock, or a startup.

"Right now, folks are a bit paralyzed, taking a wait-and-see attitude to how it shakes out" said Brian Ascher, venture capitalist at Silicon Valley venture firm Venrock. Ascher doesn't see entire firms shutting down, much like what happened during the 2000/2001 bubble burst, but VC firms will be far more selective and prudent.

VCs are looking to fund companies with credible business models vs. companies with "build-it-and-they'll-come-and-we'll-figure-it-out-later" models. "As the bar gets raised," he said. "There are fewer companies that pass through that filter."

What's more, it's difficult to fund new ventures, when existing portfolio companies may be in need of a lifeline. "You don't know how much money you need to set aside as reserves for follow-on investments," said Ascher. 

Additionally, valuations will have to come down, he said. "They have to come down because the exit assumptions are down."

All this said, Venrock is still putting money to work. Ascher wouldn't call their activity aggressive, but they're looking for deals. "We're definitely in market, making new investments," he said. "We're not out of the market... This is a time for careful, thoughtful investing."

For instance, Venrock, which backed Adify (which was sold to Cox for $300 million earlier this year), is still looking for advertising networks to invest in.

"The fundamentals behind ad networks are still very strong," said Ascher. "Basically, traffic on the Web follows a long-tail distribution curve, meaning there's millions of millions of sites, people are spending less time on top 10 sites, and more time on everything else... But 2% of sites get 98% of revenue. And, that’s got to change. The only way to do that is through ad networks." 

What are the deals that Ascher would not consider? Facebook apps is not a vibrant area, he said. Neither are digital photography and music. Additionally, Web 2.0 companies will have to deliver real results. "In general, Web 2.0 is at a point where folks want to see a real business model."

(Ascher was also our guest host in four Vator Box segments, evaluating Buzznet, Glam Media, Lyricfind and Yollege. See those segments below, as well as Ascher's lessons and advice to entrepreneurs)