If you break out venture capital from other private equity, it didn’t fare well either. VC fund-raising was at its lowest level since 2003. VCs raised $3.5 billion in 26 funds in the third quarter. So far this year, the venture industry has raised $8 billion across 83 funds, a drop of 58 percent from the $18.9 billion raised by 141 funds in last year’s first nine months.

And investors really stayed away from venture funds that invest in later stage companies, as the mergers and acquisitions market and initial public offering market where venture capitalists and their partners make money continued to suffer.

Late-stage venture funds raised $564 million through September, compared to $3 billion raised last year. Multi-stage firms raised $1.8 billion, compared to $2.6 billion raised last year. Early stage funds raised $1.6 billion, down from $2.9 billion raised last year.

The collapse in fundraising, venture capital industry veterans have said, points to an industry that will be smaller, and more targeted in its investments than it had become by the late 1990s.

“I think really what’s going on is it’s an industry in total flux,” Jim Koshland, chair of the venture capital practice at DLA Piper, a Silicon Valley and global law firm, has told Portfolio.com. “The venture world believes they’re going to shrink substantially.”

There were only three venture-backed initial public offerings so far in the third quarter, a drop from five in the second quarter, and that wasn't exactly a barn burner of a quarter. According to a report by the National Venture Capital Association and Thomson Reuters released last month, the three IPOs through the end of September were worth $572.1 million. So far this year, there have been eight venture-backed IPOs in the U.S. That's better than 2008, but it's still far from a healthy market.

But some silver linings have started to become evident, at least at the venture end of private equity.

One U.S. IPO, that of A123 Systems, which is developing batteries for electric cars, weighed in at $380.4 million, enough to give some hope that an IPO rebound may be beginning. It was the largest venture-backed IPO since 2007.

In the realm of fund-raising, Khosla was able to pull together a pair of funds aimed primarily at cleantech and totaling $1.06 billion. And Netscape founder Marc Andreesen and his partner Ben Horowitz were able to raise a $300 million fund focused on technology.

“The venture industry hasn’t been able to escape the turmoil affecting the rest of private equity,” Rossa said. “But brand-name firms and emerging managers with strong stories are still able to raise capital.”

And there are some, like Tim Draper, founder and managing director of Draper Fisher Jurvetson, who believe venture capital will not only survive, but thrive after the current drought.

“I think the industry has shrunk, but it will grow in people and in money globally over the next 5 years. I believe it will consolidate around fewer top brands.” And he expects his firm to be on top. “I think there will be successful entrepreneurs coming from all over the world, and that will encourage investment, and venture capital will be everywhere,” he told Portfolio.com in a previous interview.