A huge number of web startups were funded over the last five years. Anyone who reads TechCrunch has seen them chronicled; the Web 2.0 menagarie was dizzying. And, like in the late '90s before, the hopes (if not expectation) for each and every company were high. So why do I believe that we will see a big number of web businesses shuttered in 2009? Because the change in economic climate has made it more difficult for Venture Capitalists to suspend disbelief.

Early stage venture investors have relatively little information upon which to based our investments. We certainly have the most important clue as to the likely success of a company — we know who the founders are. But otherwise we are necessarily making predictions about user growth, market expansion, monetization, etc. And in order to invest, we need to suspend disbelief about all of these metrics and assume growth, adoption, monetization….

At each stage of investment, VCs need to suspend disbelief about some criteria or other. Initially it may be the ability to build a product with universal appeal. The next investor may see a product with universal appeal but need to suspend disbelief about the company's ability to monetize that audience. The next investor may see a product with a big audience that is in the early stages of monetization but need to suspend disbelief about the ability to scale the scope of the business and the economics. Even expansion stage investors ultimately have to suspend disbelief that even with a working product and monetization that a company will be able to maintain growth and ultimately reach liquidity. So the investment lifecycle of a startup necessarily requires a fair amount of faith.

What happens in a down economy? Investors become less willing to suspend disbelief. Entrepreneurs need to make more progress between financing events before they are able to find investors willing to bet on their ultimate success. And while some startups will be able to manage that transition, others will not be able to reach this heightened bar. I suspect the end result will be a large number of web startups funded in the mid-2000's will run out of money and, unable to find investors who are willing to suspend disbelief, will have to close their doors.

I don't think that this is necessarily an indictment of those startups or the venture process. It is just a byproduct of a system that necessarily involves a huge amount of risk. In up economies, the system is more forgiving. In down economies, less so. But, in the end, the strongest startups survive and thrive.

So, will I continue to suspend disbelief? You bet. Early stage venture investors have no choice but to believe and build. Otherwise, we will invest in nothing. I realize it is a challenging environment out there for company building. But the best antidote to disbelief is real progress. The startup world is always a meritocracy but never more so than in a tough economy. Those companies that show results will continue to get funded. Those that don't, won't. My hope is to continue to invest in those that do. And then work hard to bridge the disbelief gap.