Alternative assets as a class have come under pressure in the past year, and venture capital has been no exception. Hedge funds, buyout funds and private equity firms have experienced significant drops in their capital positions, and hedge funds have seen their losses magnified as the result of unprecedented redemptions by institutional investors.

Venture capital funds have felt some pain as part of a larger negative halo effect across all alternative assets. But pulling money out of venture has a real risk: long-term consequences not only for investors, but also for the national economy.

Venture capital is a relatively small asset class compared with its larger brothers. In 2008, venture capitalists managed about $197 billion in assets, or just 2% of U.S. GDP.

This also accounts for just 17% of the $1.13 trillion that the largest hedge funds now manage (as of March), a drop from the $1.68 trillion under management in July 2008, according to HedgeFund Intelligence Ltd.'s Absolute Return.

Venture firms that have been fundraising in the past six months have felt the pinch as they reach out to their limited partners, many of which have watched the value of their investments plummet. Some firms that have opened the doors to new prospective LPs have still fallen short of their hard caps or have postponed fundraising. A few seasoned firms have closed shop.

According to Thomson Reuters and the National Venture Capital Association, just 40 venture capital funds raised $4.3 billion in the first quarter of 2009, an amount that represents a 39% decrease compared with capital raised in the same period in 2008.

Meanwhile, venture firms have seen their dealflow rise to an all-time high, but they are too strapped to close new deals. Instead, investors are spending most of their effort and capital on current portfolio companies, and serious consideration of new investments has waned. In this environment, firms with cash are trying to protect their positions and minimize deployments of capital.

What this means is that an interesting company that would have been funded in early 2008 has almost no chance of raising capital in 2009.

By 2010, that same company will have run out of money.

When capital is readily available, venture firms are more willing to make bets on higher-risk and earlier-stage companies and, often, more cutting-edge technologies. The reluctance to take on calculated technological and clinical risk runs contrary to the thesis of venture capital. Less available capital translates into lower investor appetite for risk and, thus, fewer medical or technological breakthroughs in the future. If venture continues to shift in this direction, a transformation of the mindset of the industry may occur -- to the detriment of the long-term domestic economy.

Funneling precious dollars away from venture capital will also mean that certain innovations -- whether technical, medical or green energy -- will never make it to market. Technologies not road-tested today will mean no new companies in high-growth mode tomorrow.

While many experts are predicting when the economy will recover, the more important question is how. Although not obvious, venture capital is one critical part of the equation that will drive the economy back to health. The NVCA recently reported that venture-backed companies now account for more than 20% of U.S. GDP. By funding new companies and backing innovative management teams, venture firms are creating new jobs that, in turn, drive GDP growth.

It is easy to forget that companies now at the forefront of their industries, including Genentech Inc., Fed­Ex Corp., Google Inc. and many others, were once small venture-backed companies. Of course, thousands of startups will fail before one Intel Corp. makes it big, but during their life span, those thousands of small companies created jobs and patented technologies that eventually filled the pipeline gaps for larger companies. As large corporations fail and declare bankruptcy today, small companies will have the opportunity to rise in their places.

With the support of venture, entrepreneurs will be given a real shot at creating lasting value -- by building companies that will one day form the core of our economy. Backing away from venture right now will only slow this rebuilding process.

Sherrill Neff is a founding partner and Jessica Hou is an analyst at Quaker BioVentures, a venture capital firm investing in life sciences companies, primarily in the mid-Atlantic region. Neff is on the board of directors of the National Venture Capital Association.