spiStream Processors, a chip design firm focused on video processing, is shutting its doors after burning through at least $26 million in venture capital and is engaged in an asset sale, VentureBeat has learned.

The closure is a blow to one of the bigger efforts to push parallel processing, which uses many different processing cores, or brains, on a single chip. However, rivals such as Nvidia, Advanced Micro Devices and Intel have all adopted some of the parallel processing techniques that Stream Processors had pioneered.

A former company representative said that Stream Processors (see VB profile of the company) will likely be formally shut in a month or so. The former chief executive, Chip Stearns, is forming a new company to acquire all of the assets from Stream Processors, so it’s possible its technology will live on. The new company is expected to continue to supply its current generation Storm-1 processors, but it isn’t clear what will happen with the Storm-2 second-generation chips.

The San Jose, Calif.-based company was founded in 2004 by Bill Dally, dean of the computer science department at Stanford University. The company made a bid to get its chips inside the Xbox 360, but Microsoft chose an IBM PowerPC chip and an ATI graphics processor instead, partly because it was a more familiar programming model. Software developers really didn’t know how to develop code for Stream Processors’ chips. Dally left Stanford in January to become chief scientist at graphics chip maker Nvidia. The company churned out its first chip samples in 2006 and began shipping its Storm-1 series chips in 2007.

Attempts to reach Stearns were unsuccessful. The company focused on making video surveillance and high-end consumer electronics chips. Rivals include chip makers such as Stretch and Texas Instruments. Stream Processors had funding from Austin Ventures, Norwest Venture Partners, and Woodside Fund.

The recession has not been kind to chip startups. Few chip makers are getting funding these days, since it can take tens of millions of dollars to fund a new chip company.