Venture capital funds found 612 companies in which to invest $3.67 billion in Q2. Of this, $1.5 billion (41%) was first-time financing, according to a report by PricewaterhouseCoopers and the National Venture Capital Association. This is only slightly ahead of the action in Q1, in which 141 transactions were first-time, and far behind the pace we enjoyed earlier this decade.

The biotech sector was the big winner in a shrinking market, with funding up 54% to $888 million over 85 deals. The software business was flat quarter-over-quarter at 4644 million over 135 transactions. Investments in internet companies fell 15% to $524 million via 124 deals. Clean technology showed considerable growth, up 15% to $274 million, with 42 transactions closed.

Several months ago, I talked to a VC, who was kind of glum. He said: "M&A as an exit is OK for our investments. But the big returns come from IPOs. And, if things don't comeback on that front, it will be trouble for the VC industry."

Well, according to a recent piece in SiliconValley.com, there may be hope.

For example, there have been a variety of strong tech IPOs recently. Examples include: Riverbed Technologies, eHealth, and Acme Packet.

In fact, this week, we saw strong performances from Isilon Systems and IPG Photonics.

Interestingly enough, the bad-times may have meant stronger VC-backed companies. That is, they had to focus on building strong business models.

So, while the IPO market is starting to comeback, investors are getting quality deals.

Tom Taulli is the author of various books, including the Complete M&A Handbook and operates DealProfiles.com.