While imploding financial markets have zapped investors into spending paralysis, one Atlanta venture capital firm is going on a $400 million buying binge.

Arcapita Ventures plans to raise a petrodollar-fueled investment fund early next year, aimed at health-care, information technology and industrial technology firms on two continents.

“The best time to buy is when there’s blood on the streets,” said Stephen Fleming, Georgia Tech’s chief commercialization officer, echoing the “buy-low, sell-high” investment mantra. “For somebody that does have deep pockets and a long holding period, this is a good time to be investing.”

$400M fund will invest in U.S., Europe - Atlanta Business Chronicle:

A quartet of Atlanta technology impresarios has launched TechOperators LLC — a venture capital firm geared toward early-stage firms too small and risky to attract traditional VC dollars and too big for angel investors.

Blue chip tech fund raising $30M - Atlanta Business Chronicle:

We were able to track down the presentation that Sequoia Capital gave to its portfolio company CEO’s earlier this week (and so did VentureBeat). It’s a long, 56 slide Powerpoint message of doom and gloom in Silicon Valley that we covered yesterday along with an email that angel investor Ron Conway sent to his 130 active portfolio companies.

The final text slide reads “Get Real or Go Home.”

Benchmark Capital jumped on the band wagon today with their own email to portfolio companies. The messages are all similar - companies need to stay ahead of the curve as much as possible. Cut costs now, and raise capital if you can. If there’s someone out there willing to buy you, do it. Etc.

Of course all this negativity helps create the very downturn that venture capitalists are warning their companies to defend themselves against, perpetuating a sort of vicious cycle downward. But that’s ok, sometimes the hedge needs to be pruned. And this is what makes Silicon Valley its ugly, beautiful self.

This is the best explanation of what is going on that i have found so far.

Sequoia Capital’s 56 Slide Presentation Of Doom

Tannerite Binary Exploding Target Company

WTF?

Tannerite Exploding Targets from Tannerite Explosives Corporation - Manufacturer of High Explosives, Low Explosives and Fireworks

But if a stock market's performance is the test of a policy, this one has failed. At best, the passage of the measure did no evident good. At worst, it backfired.

Harvard economist Jeffrey Miron suspects the latter. "The bailout approach will generate uncertainty about what's going to happen," he told me. "It's quite plausible that it has not calmed markets because no one knows what it means."

Rescue or Waste?: Why the bailout isn't working - Reason Magazine

As everyone is aware, the global economic downturn is upon us and we’re all standing around trying to figure out what this means for all of us — especially us startups. I hope nobody is living in a bubble and believes we’re at the bottom and it can’t get much worse. My prediction, and plenty of others, is that it’s going to get much, much worse and last a lot longer than we can imagine. Maybe decades at this point, although that’s even hard to fathom.

The public markets are going to take a really bad beating and many companies, even companies with fairly strong balance sheets and business fundamentals, could find themselves in terrible terriority - either by a takeover or massive layoffs and cost reductions.

All-in-all, I do believe that this is a necessary cycle - part of the normal cycle of things. If you look at the chart for the past 30 years, we’ve been on the up and up for a long time. An overall correction is due.

I also believe that a large portion of the spiral is psychological. Nonetheless, the spiral will spin out of control for a good bit of time and we all need to be prepared. As a startup, you’ve got some really, really tough choices to make. Some are obvious, some are not so obvious. My advice would be to think long and hard about survival, forget everything you thought you knew a week ago and assume you’re going to have to get heads down and grunt through this. Even well funded startups are going to be in big trouble soon if they’re not careful. All your models, your predictions, yours forecasts and best guesses are gone. Throw them out and assume ZERO.

Jeff Haynie, who's company Appcelerator just raised its series A, talks about startup survival during the meltdown.

The economic downturn and your startup | Introspection

See Jimmy, that’s the New York Stock Exchange. That’s where people traded incredibly convoluted financial instruments that no one really understood until one day the whole thing went BOOM!

Sad Guys on Trading Floors

Ideas are one of our most important exports, and two fundamentally American ideas have dominated global thinking since the early 1980s, when Ronald Reagan was elected president. The first was a certain vision of capitalism—one that argued low taxes, light regulation and a pared-back government would be the engine for economic growth. Reaganism reversed a century-long trend toward ever-larger government. Deregulation became the order of the day not just in the United States but around the world.

The second big idea was America as a promoter of liberal democracy around the world, which was seen as the best path to a more prosperous and open international order. America's power and influence rested not just on our tanks and dollars, but on the fact that most people found the American form of self-government attractive and wanted to reshape their societies along the same lines—what political scientist Joseph Nye has labeled our "soft power."

It's hard to fathom just how badly these signature features of the American brand have been discredited. Between 2002 and 2007, while the world was enjoying an unprecedented period of growth, it was easy to ignore those European socialists and Latin American populists who denounced the U.S. economic model as "cowboy capitalism." But now the engine of that growth, the American economy, has gone off the rails and threatens to drag the rest of the world down with it. Worse, the culprit is the American model itself: under the mantra of less government, Washington failed to adequately regulate the financial sector and allowed it to do tremendous harm to the rest of the society.

Fukuyama: The Fall of America, Inc.

We conducted a soft survey at last week's Atlanta Angel Lounge meeting. As you review the results, you should keep in mind that this crisis is new and unsettled. In fact, since our last meeting the Dow Jones Industrial average dropped over 1,400 points. So this data, although only a week old, may be outdated.

Here is what we learned from a gathering of 25 Atlanta angel investors:

* The professional angels with a sizable wealth base said, 'it will be business as usual.'
* There was agreement that with AAA rated companies like GE paying 10% with warrants for long-term money, valuations for early stage companies will be lower. The risk/return ratio is shifting with the market.
* Many angels are sitting on the sidelines waiting to see what their liquidity will be when the markets get back to some rhythm, good or bad.
* Deals will be more closely scrutinized and therefore more time will be needed to raise money.

Charlie Paparelli - Angel Investments in the Downturn

Like other tech hubs, successful Seattle entrepreneurs tend to become angel investors and help the next crop of companies come of age. An example: Pressplane, which recently announced a long list of Seattle angels.

Now those angels are getting a little more organized by investing in the relatively new early stage fund Founder’s Co-op. The fund was first launched last March by (now-deadpooled) Judy’s Book founders Andy Sack and Chris DeVore, and focuses on early stage investments. They typically invest $100,000 - $300,000 in an angel round. To date they’ve made three investments for a total of about $700,000.

Now Founder’s Co-Op has expanded, raising another $1.8 million from a number of well known Seattle entrepreneurs: Ben Elowitz (Wetpaint, Blue Nile), Alex Algard (WhitePages.com, CarDomain), Adam Brotman (Play Network), Andy Liu (BuddyTV) and others.

Seattle’s Top Entrepreneurs Band Together To Invest In Local Startups