When the stock market goes into the dumps, it takes a while for the effects to trickle down to start-ups. That’s because start-ups are often are working away on a project that’s isolated from the larger market — and if they’re lucky, they have money from venture capitalists.

For the start-ups with no angel or VC backing, forget about raising money. They’re going to have trouble immediately. VCs are paying too much attention to their existing companies. But what about those lucky ones — those who already have a venture backer? The conventional wisdom is those companies will have an easier time getting money again when they need it, because VCs want to make sure the companies survive long enough so that they can earn a profit on the investment.

But it comes at a price. When the entrepreneur returns to the VC, an epic battle ensues over valuations. In a climate of fear, the power pendulum swings back to the VCs. The VC knows that an entrepreneur won’t be as likely to get money elsewhere, so he plays hardball. The entrepreneur is more ready to cave in on the valuation. That means when a VC gives the entrepreneur money, the VC can claim more ownership of the company with a given amount of investment (because the company is worth less.) Tension rises, and boardroom fights begin. I saw it all unfold last time, when I started covering venture capital in 2001.

Let’s take a look at the valuations of start-ups during the last boom, and how they trended in subsequent years. The National Venture Capital Association’s statistics are about as good as we’re going to get. They aren’t perfect, because they rely on valuations as voluntarily provided by the NVCA’s member venture capital firms, so the sample size may be too small to be completely reliable. But with that caveat, they do show that from 2000 through 2003, valuations fell pretty hard. You can see it took a while for the valuations to hit bottom, even though the market crash took place in mid 2000.

What does that mean for today? Well, the market’s crash these past two weeks is too fresh to have worked itself through the system. Companies are in the middle of tension-filled negotiations with their venture backers, but we don’t have any stats yet.

Now lets take a look at some recent valuations at one of the most aggressive venture capital firms in Silicon Valley: New Enterprise Associates. That firm has demonstrated how it has offered very rosy terms to entrepreneurs in recent years, bidding up value levels of companies like SolFocus and SugarCRM by offering large amounts of cash for relatively small ownership stakes. It did so because it believed: 1) the deals were competitive and NEA wanted to participate, and so outbid other venture firms to do so, and 2) because it has more money than other venture firms, and so was mandated to put its money to work.

That’s a decent strategy when you’ve got a robust economy. But when the market turns negative, NEA will have difficulty justifying these valuations. They and other investors are more likely to negotiate tougher. In some cases, the dreaded “down round” will emerge, which is where a VC invests at a valuation lower than the company’s previous ones — a particularly brutal snub because it suggests the company has lost value since it raised its last round.

NEA is the leading VC firms this year (so far) in the amount invested. The firm is second in the total number of deals (again, so far this year) to Draper Fisher Jurvetson. I don’t mean to