There are more deals and more cash going to Internet startups than ever before. The lower valuations and struggling companies are a natural and healthy end result of the boom in early stage funding for social/local/mobile companies that took place during 2009-2010.
Sure, it surprised us all when revenues and earnings turned out to actually matter in 2000, but it's 2011 now, man, and the future's so bright I've got to wear shades! The fact that I can download 14,511 apps that allow you to share photos of your cats is the only indication you need that we're living in the post-earnings era.
Making money is for squares. As long as you can line up that Series P round, the party's still on, man. Rock it, don't block it.
What's sad is I think many entrepreneurs are taking this seriously. They think "starting a company" means raising a ton of money, working on cool projects, and never once thinking about making real money.
It's getting harder and harder to call these projects companies or businesses.