“Venture capitalists are starting to invest a little more money in a few more companies, but they have a way to go even if they believe the worst is behind them,” writes Ann Grimes in today’s Wall Street Journal.

“A survey to be released Tuesday reports that overall venture investing — which hit a five-year low of $4 billion in the first quarter of this year — rose slightly to $4.3 billion during the second quarter. According to a survey by PricewaterhouseCoopers, Thomson Venture Economics, National Venture Capital Association and MoneyTree, it was the first increase since the Internet-stock bubble burst and the venture industry began its precipitous slide 12 quarters ago. Perhaps more important, investment in early-stage start-ups jumped 43% to $956 million from $668 million in the prior quarter.”

“All told, 669 companies received venture backing in the second quarter compared with 647 during the first quarter of the year, the study found. Those results are in line with industry norms from 1996 and 1997, when venture investment dollars for the year fell in the $12 billion to $15 billion range and there were 600 to 900 deals per quarter. At the height of the boom in 2000, investment dollars peaked at $106.2 billion for 8,138 deals, Venture Economics data show.”

” ‘The numbers are up,’ says Mark Heesen, president of the National Venture Capital Association. ‘Is this a harbinger of a dramatic turnaround in venture capital investing? It’s not likely.’ “

“The results follow a smaller survey released Monday by Ernst & Young and VentureOne, which reported the same trend — a second-quarter rise in funding to $4 billion from $3.5 billion in the prior period, fueled largely by increased investment in biopharmaceuticals and medical devices.

The new investment is fueled by optimism over the Nasdaq Composite Index’s rise — 21% in the second quarter — and a few promising initial public offerings of stock. Seven companies have made their public debuts so far this month, compared with five IPOs in each of the first and second quarters.”

“To be sure, some might note that after three dismal years the industry has no where to go but up. Between $70 billion and $80 billion in committed capital remains in the pipeline and investors are eager to see VCs put that money to work. ‘You can only dip your toe in the water for so long and then you have to dive in,’ says Mr. Heesen. ‘The triaging is pretty much done with. For a while people could blame 9/11, Iraq, the [decline in the] Nasdaq — that’s not around any more. There are no excuses.’ “

“Two hundred early stage companies — accounting for 22% of all venture capital dollars for the quarter — received funding, up from a low of 155, or 17%, in the first quarter, inching back toward the industry’s 25% benchmark for early-stage dollars. First-time financings, which can also include later-stage funding rounds, also rose, attracting $775 million or 12% more dollars than in the previous quarter.”