A string quartet played a medley of pop radio hits as several hundreds startup founders, Goldman Sachs bankers, and venture capital investors, chatted over drinks inside a gleaming neon temple of Angel Orensanz in lower Manhattan. The mood was upbeat, but shadowed by recent events, calling to mind that famous Charles Dickens line about the best and worst of times.

"I’m going to talk about a pre-Facebook IPO and a post-Facebook IPO world, because the markets have changed substantially," said Anthony Noto, the co-head of Goldman Sachs Global Telecommunications, Media and Technology unit, the man responsible for identifying promising young startups, grooming their business, and winning their business for an IPO. "What our team is hearing in the field is that it’s going to be a lot more difficult and lot more expensive for young companies to raise capital now."

The occasion was F.ounders, a networking event that has been dubbed the "Davos for Geeks", after the elite conference of power brokers held in Switzerland each year.

"These firms are underwater on their valuations."

Over three nights and two days of drinking, schmoozing, and panel discussion, many of the industries insiders spoke their minds plainly, and the bumbled Facebook IPO was a frequent topic of conversation."Excuse my French, it was a clusterfuck," Elevation Partners Roger McNamee told the audience as they nibbled their kale salads. "It’s like you had a chance to win the Super Bowl and you didn’t show up for the game."

The Facebook IPO has revealed the fundamental bubble in Startupland. "A lot of companies, when you look at their value on the public markets, versus what they were worth on the secondary market when they were private, these firms are underwater on their valuations," said Benchmark Capital’s Bill Gurley. The IPO Window that saw companies like Pandora, LinkedIn, Zygna, and eventually Facebook go public, is snapped shut until at least Labor Day, said Goldman's Noto.

When the market shuts a window, however, it opens a door. "Things have really picked up in terms of mergers and acquisitions. There is an immense amount of capital on the balance sheet of big tech companies and not a lot of value to keeping cash," said Gurley. With an IPO now less of possibility, young companies are more open to being purchased. Microsoft, Google, and Apple are all hoarding mountains of cash, and Mark Zuckerberg has shown that he isn’t afraid to put his newfound riches to work, with numerous acquisition in the past few months (Instagram, Glancee, and Face.com to name a few).

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"There was an immense amount of M&A after Google went public, and I think you will see a similar effect post-Facebook IPO," said Goldman Sachs’ Noto. "Capital will be harder to come by, and founders will be more open to sell. That is coupled with some big disruptive trends, like a post-PC world dominated by mobile, which is forcing incumbents to jump in where they can’t innovate, so they don’t get left behind this wave as they did with social."

"It’s like you had a chance to win the Super Bowl and didn’t show up for the game."

This presents an interesting conundrum for venture capitalists. "The hard part right now is keeping these CEOs in their seats," said Roger Ehrenberg, head of IA Ventures, chatting after the TechStars Demo Day at Webster Hall on the afternoon before the big F.ounders dinner. Thirteen promising young companies had just taken the stage, and Silicon Alley’s tech community was abuzz with the news of Single Platform being acquired by Constant Contact for $100 million, hot on the heels of Buddy Media being purchased for $800 million. "A lot of these companies are being plucked from the vine before they have a chance to fully ripen."

Don’t feel too bad for the investors or young entrepreneurs, though — it’s all relative. "We just sold SinglePlatform for $100 million, which was life changing money for those entrepreneurs," said RRE’s Eric Weisen. "We’re immensely proud of the company, but it was bittersweet for me, because I knew they could have built a $500 million business."