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While economic atrophy has given pause to risk-loving venture capitalists, software remains a soft spot for many investors. Venture funding slumped to its lowest level in four years in the third quarter of 2002; still, software companies enjoyed a 28 percent boost compared to the same period a year ago. That increase amounted to $1.2 billion in venture capital for the sector, according to consulting firm Ernst & Young and research firm VentureOne. Altogether, software companies accounted for 35 percent of venture capital in the quarter.

"Software companies are easier to fund because they don't have a lot of inventory risk," says John Copeland, founder, chair and chief scientist of Lancope, a network security firm in Atlanta. His company received $5.5 million in VC funding last April. Having a solid sales record helps, too, Copeland says: "Our funder wanted a product that was proven in the marketplace, [not] just a company with a great idea."