For start ups in 2009, there is a high likelihood that no new competitors will be funded in this stressed environment. So, for those already funded, the challenge is to take advantage of this absence of new entrants. Competition exerts a variety of pressures on resource constrained startups. Most of which serves to drive development, marketing, sales or management in unintended and frequently inefficient directions.
Yes, it is tough to gain attention and interest for new solutions in an atmosphere of reduced budgets but it is arguably more manageable than facing an army (small or large) of emerging competitors. My continual advice to CEO's is to continually assess and focus upon items "within their personal control" and the absence of competitors makes that much easier.
The downside is that funding will be tough if you need and really tough if one tries to "fall back" over those burned bridges. This is arguably the worst year in memory for first time funding. And on the flip side, perhaps one of the best years to put it to work growing a business.