The Panic of 2008 finally hit Silicon Valley and the start-up economy full force last week, and even though I'm a grizzled veteran of an ugly dot-com-bust bankruptcy, I have to say it sent more than a few chills down my spine.

Sequoia Capital, one of the world's premiere venture capital firms, called the executives of its portfolio companies together to deliver a grim message: the downturn is going to be deep and long, and start-up companies that aren't either profitable or sitting on a lot of cash are going to be in big trouble. One Sequoia presenter apparently noted that the last bear-market cycle lasted 16 years.

The blogosphere was full of advice from entrepreneur-pundits like Jason Calcanis and the message was pretty consistent: take drastic measures now, and focus on survival. Cut staff, cut salaries, cut anything and everything you possibly can, and be prepared to remain in that mode for quite a while. If you're in an advertising-supported business, as NewWest.Net and many other Web 2.0 firms are, you're in an especially tough spot.

The apocalyptic language is I think partly a function of the fact that so many of today's internet entrepreneurs and financiers have in fact been there before. Anyone who was in the internet business in 2000-01 knows that the dot-com bust was much more severe than generally anticipated, and a lot of companies – possibly including my own – didn't make it at least in part because they didn't act quickly enough.

No one wants to be the person who failed to learn that lesson.

On top of that, though, is the scariness of the news itself. For me, Thursday was a tipping point. The world's key central banks, in an unprecedented move, got together on a coordinated interest rate cut. One of the iron rules of stocks is that they go up when interest rates go down, and vice versa. Yet the markets greeted the rate cut with renewed panic, with some stock indexes falling further on that day than ever before.

As a business journalist, I was always taught to be very careful with words like "crash", "panic" and "meltdown." Markets are all about psychology, and journalists can influence that psychology with their headlines and story lines. But last week that was all out the window, with TV and newspapers blaring those very words over and over again. It just seems silly to be delicate when the facts are so harsh.

The dynamics of the financial death-spiral, moreover, are brutally evident on a personal level to millions of people and companies. The economy over the last decade has been driven by consumer spending, which in turn has been driven by people borrowing against rising real-estate values. Pull the plug on real estate, and the cascade effect is immediate. Suddenly cash-poor households stop spending, which hurts the businesses that benefited from that spending, which results in more cash-poor households and more struggling businesses, and on and on. Even a "successful" government rescue that stems the panic won't change these fundamentals.

So what's an entrepreneur to do? Well, for starters, see paragraph three, above. As you're reading this, I'll be talking to my staff about pay cuts and layoffs, and consulting with my board about our alternatives. It's going to be most unpleasant.

A couple of things offer some hope, even opportunity. For one, the structural changes in the media business, and especially the growing importance of online, will not reverse themselves in a downturn. The share of advertising dollars spent online will continue to grow even if the overall pie is shrinking, so it's not as if our market opportunity is dead.

Furthermore, there are many historical examples of companies that took advantage of lean times to gain mind-share and market-share, and then reaped the benefits for decades. One of my business partners today sent me this link to a great essay exploring some examples of this from the Great Depression, with the conclusion being that you need to advertise no matter how ugly the market.

I can take some comfort in that. But I still need to figure out the survival part.

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Jonathan Weber is the founder and editor in chief of NewWest.Net, a regional news service focused on the Rocky Mountain West in the United States. He was previously the co-founder and editor in chief of the Industry Standard