A gloomy piece in the Wall Street Journal today analyzes the demise of Silicon Valley start-ups—"as demand for their products continues to deteriorate and funding dries up." The article highlights, or should I say, lowlights, Sherwood Partners, a Mountain View firm that specializes in "winding down start-ups." Since mid-January, Sherwood has shut down an average of three start-ups a week, up from just one or two closures a month in September.

The Journal, and everyone in the Valley, is worried that the trend will suffocate innovation. "That such shutdowns have reached tech start-ups shows how far the recession has spread from its Wall Street and housing-sector roots and how it now could slow innovation," writes Pui-Wing Tam and Ben Worthen in the Journal.

They quote Richard Mammone, a professor at Rutgers University who has also started several tech companies. "Start-ups are typically where innovative products and services are created," he says. "In normal conditions, the market rewards the best young companies and only the nonviable ones go bust. But in this economy, "it's not survival of the fittest.'"