Venture capitalist Vinod Khosla of Silicon Valley firm Kleiner Perkins Caufield & Byers brought the problem up at a conference in San Francisco several months ago in a presentation called "Ahead to the Past! Next-Gen, Old-Fashioned Venture." Although his study was different (Khosla looked at the period between 1995 and 2000 and his numbers were about 50 percent higher) and now slightly outdated, he made the same point as VentureOne in his slide called "The Illiquid Bulge," in which he outlined the current company glut.

Gene Riechers of Valhalla Partners in McLean was surprised too by the numbers when he saw Khosla's presentation. To him, the most important lessons to be drawn from the large number of still- standing companies is that venture capitalists have much more work to do on their existing investments. He's concerned it will be more difficult for VCs to concentrate on and invest in new deals. Riechers says the stage that VCs have been going through to decide which companies live and die and how to help the ones that have promise -- a process generally called "triage" -- is far from finished.

Simply existing as private companies for many years won't be an option for these businesses because of the very nature of venture funding. The company founders have sold off a chunk of their businesses and in return VCs want money back for their own investors. That's why VCs typically invest in high-risk, high- potential companies rather than the corner grocery store. And VCs, on behalf of the pension funds, endowments, high-net-worth individuals and others who invest in them, have already lost enough. The amount invested in failed start-ups created since 1999 alone adds up to $15.3 billion, according to VentureOne.