entrepreneurship in a downturn

I read an interesting article on the harvard weekly about the above
topic and its amazing that entrepreneurs will always find opportunity
in any situation, and in this case, the opportunity is during a
downturn.

It goes to say that when capital is scarce, then only the best most
efficient, most creative ideas will get funded.

However, I am puzzled by the above. If this occurs in an environment
of high entrepreneurial activity, then one can postulate that the
businesses that get funded are truly the cream of the crop.

However, what happens in a situation where there is relatively low
entrepreneurial activity, where risk taking is frowned upon. What
then? if there is a scarcity of projects, then does it mean that there
would be a mismatch between the capital that is going into less than
ideal projects?

I see singapore as being in the latter group, and fear that while the
efforts of the government in stimulating more risk taking, the
projects that are being funded is not the one that have a high
survivability factor.

What do you think? Keep capital scarce or risk pouring good money into
bad projects?