Amid an IPO drought and the economic downturn, one investor believes that the venture industry should take the amount of money it puts into startups each year and slash it by nearly half, to between $15 billion and $20 billion. That’s compared to the recent annual average of $26.51 billion invested over the last five years, or last year’s total of $28.3 billion.

I wrote yesterday about the triage beginning in the venture industry, and today I chatted with Fred Wang, a general partner at Trinity Ventures, a $300 million fund that does some 8-10 deals a year. Wang was optimistic about his firm’s portfolio, noting just a handful of cutbacks and one company that’s seeking a recapitalization in which Trinity won’t participate. But he was less sanguine about the fate of the venture industry overall.

As far as he’s concerned, the venture biz needs to cut back on investments. Wang argues that there’s still too much money backing deals. He believes that during the last downturn, more venture firms should have failed, but because there was still so much capital invested in VCs, private equity firms and other funds, the dot-com bust wasn’t able to last long enough to bring the industry back to a sustainable size.

“There was so much low-cost capital available, that it was inevitable that the balloon would re-inflate before it deflated enough,” says Wang. “This downturn could help the business get rightsized. We’re just waiting for the other shoe to drop after the last downturn.”

If he’s right — and others have made similar arguments — then startups will find less capital overall. That’s not to say that VCs will stop investing in companies (they can’t), but that with fewer VCs and less money, it’ll be hard to get a deal done. The fourth quarter of last year averages out close to Wang’s ideal size for the industry, which means that the last few months may presage the capital-raising future ahead.