Ray of Hope? VCs are optimistic about the coming year but are still holding on to their purse strings.

Could it be? Is the light at the end of the long, dark venturecapital tunnel finally flickering? It's hard to say, given thatVC experts have optimistically speculated, with each quarter'sdecline in investing, that the industry had finally hit bottom.Unfortunately, the loud thud was never quite heard.

But recent numbers offer more fodder for those taking theoptimistic view. After nine quarters of decline, venture investingin the fourth quarter of 2002 finished nearly flat from the priorquarter, according to the latest MoneyTree survey from PricewaterhouseCoopers (PwC), Venture Economics andthe National Venture Capital Association. The dollars investeddeclined from last quarter by only $300 million to $4.2 billion,while the number of entrepreneurs funded--692--was up from 671.

Overall, 2002, with $21.2 billion of venture capital invested,finished at the same level as 1998 and at about half that of 2001.Because exit strategies are still out of reach and VCs can onlyguess how long their money will be tied up, the low dollar amountsbeing invested aren't surprising. Valuations before investmentare still below what they have been, and terms for entrepreneursare tougher than ever, says Tracy Lefteroff, global managingpartner of PwC's venture capital practice.