Silicon Valley is as dry as the Sahara, according to two new reports on venture capital liquidity.

Venture capital exits through initial public offerings and mergers and acquisitions plunged 66 percent in the third quarter to $4.6 billion, according to Dow Jones VentureSource, which called the IPO environment the worst on record.

A second report released Wednesday morning by Thomson Reuters and the National Venture Capital Association echoed Dow Jones, finding just one venture-backed IPO in the quarter and only 58 M&A deals.

As with other segments of the economy, the global credit crisis is casting a dark shadow over venture-backed companies. Though limited partners typically enter long-term financing agreements, the collapse of IPO and M&A markets mean they won’t be repaid as quickly. That means VCs won’t have funding to finance new companies or to add follow-on rounds for current companies.  VC fundraising also could be far more difficult in coming years as investors pull away from risky investments.

“It is important to note that venture investing is long term and does not use leverage,” NVCA spokeswoman Emily Mendell said in an e-mail. “Therefore, we are not impacted directly by the bank failures. However, over time, the venture industry, like the entire U.S. economy, will feel the pain the clogged exit pipeline, the skittishness of corporate acquirers, and less time and money to invest in new companies.”

The sole domestic venture-backed IPO in the third quarter was the roughly $187.5 million deal for Rackspace Hosting, which runs companies’ IT departments through web services. The Thomson Reuters report also recorded two U.S. venture backed companies that staged IPOs on foreign bourses in the quarter.

The top M&A deal in the quarter was the SBA Communications’ $430 million acquisition of Optasite, a wireless infrastructure provider based in Westborough, Massachusetts.

Dow Jones tallied 66 M&A deals worth $4.4 billion in the quarter. For the first three quarters, Dow Jones reckoned there were seven U.S. IPOs that raised $551 million, putting 2008 to be the worst year on record.

The median time to liquidity for VC-backed companies increased to 6.1 years for an M&A deal, while the median amount paid for VC-backed companies contracted to $56 million, Jessica Canning, global research director for Dow Jones VentureSource, said in a statement.