While the South by Southwest festival used to be known almost exclusively as a place where little-known bands could make their name, SXSW (News - Alert) is growing into something much more. In the last few years, the SXSW festival has managed to make itself one of the most important festivals around for tech startups to show off their wares and it appears that this year is going to be no different.

Of course, the problem with the number of startups that are trying to break out at SXSW is that it can be hard to stand out among the crowd at this point. Several venture capitalists have been telling startup companies that while the festival was once a great tool to get your start, it appears the effectiveness of using this approach is starting to fade. 

“It has become challenging to break out at SXSW because there's so many great startups competing for the attention of thought leaders here,” said Kleiner Perkins Caufield Bowers partner Chi-Hua Chien. Other venture capitalists echoed this basic sentiment with the same advice for new startups … stay far away from SXSW.

This advice is a turnaround from just five years ago, when Twitter (News - Alert) really made the scene by putting up large screens in the main conference hall and began showing off its tweets. The location-based social networking site Foursquare (News - Alert) also had a bit of a coming out party in 2009 when it showed off what it could do at the festival. Many people believe that some of the large scale unveilings that Twitter and Foursquare did are things that simply don't blow away the attendees anymore.

One industry analyst said that there is a way in which startups can make a name for themselves but it will take quite a bit more than just bringing their product to the SXSW festival. The analyst says the company will need to be running an SEO type campaign before SXSW and then they should unroll a targeted approach rather than trying to blow people away with a huge presentation. So who will emerge this year as the company to talk about? We'll just have to wait and see.