Has it really been 12 years of ample funding? My recollection is that the downturn in 08-09 was really steep, with Sequoia sending out warnings to all their portfolio companies, mass layoffs at most Bay Area tech companies (my roommate when I moved out here went through 4 rounds at EMC, and was doing the work of 3 people by the end of it), dramatic rent decreases, and the almost total extinction of the Web 2.0 startup craze (remember that?). It recovered in late 2010 with the mobile boom - that's when companies like Uber, Instagram, SnapChat, Parse, etc. were founded. And those companies that managed to survive the downturn (DropBox, AirBnB, KickStarter, Whatsapp, Evernote) emerged quite strong, and were ready to take on massive amounts of funding afterwards.
I was out of the US then, so I may well be wrong. My recollection (working remotely as a consultant) was that people panicked for a month or two, and after that working in tech was like a magical oasis from the chaos.
Experiences varied wildly. For employees, it was a terrible time. Large companies were laying off left and right, and Sequoia did indeed advise all CEOs to fire their devs if their product was already on the market.
However, since the stock market was doing so badly, it was the beginning of the moment where a _lot_ of money started looking for somewhere else to go. So if you were of the wherewithal to go out and make a startup, it was a great time to be looking for funding.
So it depends a lot on who you ask. I will say, though, that real estate started taking off in ~2011, so it was more than a month of panic, but I would guess that in 2011-2013 or so SF was far and away the strongest local economy in the US.
In Seattle there were mass layoffs, people lost homes, the economy spent a few years in a form of stasis. Relative to what I saw happen in other parts of the country though, we were minorly scathed.
The weekend before Lehman collapsed, we closed the biggest deal in the history of our company --- with a giant NY investment bank. At the end of the weekend, the deal had vanished.
Other than that, not even a hiccup. At that time, we were in Chicago and NYC, but not in the Bay Area. However, a pretty big chunk of our client base was in SFBA, and I don't remember that part of the business skipping a beat.
