The credit crisis and ensuing financial instabilities in the U.S. and world markets are causing pain in Silicon Valley, as established companies must deal with decreasing demand while start-ups must lower costs due and buckle down for long-term slowdowns, the Wall Street Journal reported.

Last week, Sequoia Capital told the heads of its portfolio companies to look for cost-cutting measures while aiming to become profitable, according to the Wall Street Journal report on Friday. Sequoia has invested in companies like Google Inc. and YouTube.

Another firm, Benchmark Capital, told its portfolio companies in a letter that “financings as we know it just got a whole lot tougher,” and that “the rules of the game have changed,” according to the Wall Street Journal.

Technology companies seemed more safe from the U.S. credit crisis than most, as they benefited from strong sales internationally that were helped by the weak U.S. dollar. They also average very little debt, which put them at much less of a risk on the credit market front. “But the turmoil of the past few weeks has changed that momentum. Venture capitalists are running into trouble raising new funds and tech vendors are getting squeezed as businesses cut budgets, banks pull credit lines and consumers close their wallets,” the Wall Street Journal article stated.

Last month, Mattson Technology Inc., a chip-manufacturing equipment company based in Fremont, Calif., announced a plan to cut employees by 14 percent. Also last month, Hewlett-Packard Co. announced it will slash its staff by 24,600 employees (7.5 percent), due to an acquisition, and Nvidia Corp, a chip maker, announced it would cut 6.5 percent of employees, according to the Wall Street Journal.

Last week, eBay Inc. announced it will cut staff by 10 percent (about 1,000 full-time jobs), and Microsoft Corp., based in Redmond, Wash., announced it is reviewing its recruitment plans, the Wall Street Journal reported.