I dunno, but when it happened to me, it totally derailed everything. It was one of those moments when you want to argue with the prospect - "As if funded companies don't go out of business?" - but that's probably not a good strategy. :) So I just sat awkwardly and tried to explain that we'd been approached by VCs but hadn't pursued anything.
I hope it doesn't come up that often. I worry, though, that it's actually some sort of signal to the average prospect (who's not in the startup world).