New ventures in the tech space are going to have to start looking elsewhere for the startup funds they used to get from angel investors according to an article in yesterday’s New York Times. Part of the story and the one highlighted by the Times is that angels, like just about everyone these days are holding on to cash like a security blanket. The other part unfortunately is that with economic activity slowing to a crawl most new ventures have a lower probability of success over the next few years than they had just a few months ago. Put any five-year P&L forecast form last summer in the shredder.

Although angels and entrepreneurs shouldn’t crawl into their caves to wait for sunnier economic times. Here are some ideas for adjusting:

1. Focus on ventures that can help companies cut costs and get incremental revenues in the next few years. There are lots of opportunities beyond bankruptcy law and pawn shops. Every company is looking for new processes that can help shave costs, or cheaper and more effective ways to get new customers.
2. Focus on ventures with long term upsides. We’ve been through a bazillion of these downturns over the course of human history. Like the weather, economic storms pass and the sun shines again. Ventures that need a long lead time to develop a new product or service are still good bets because in 5 years or so (ok, who’s to know) the economy will be going gangbusters again.
3. Invest in development now. The next few years are a great time to build the guts of new businesses—it’s easier to get top notch employees and to cut deals with suppliers. Any venture that required development in the next few years for a product or service that would roll out in 5 years is a better investment now— and it will be cheaper to do everything.

For angels sitting on their cash a couple of reminders:

1. If you have your cash invested in anything just keep in mind that nothing’s safe these days. In retrospect, your nutty entrepreneur neighbor might have been a better investment than oh, say, Lehman’s.
2. If you have your cash under the mattress you might read the Wikipedia entry on “hyperinflation.” With the kertrillion dollars a year Uncle Sam is pumping into the money supply your $100k stash might just cover a frappucino in a few years. A lottery ticket on the next Google might be a better use of your cash.