Ready, Set, Flow Optimistic entrepreneurs are testing the VC waters now that the market's future looks brighter.

Oliver Curme sums up the current venture capital climate-and theoutlook for 2004-in five long-awaited words: "Happy days arehere again," says the general partner of Battery Ventures, aVC firm in Wellesley, Massachusetts.

You wouldn't necessarily know it was time to celebrate justby looking at the numbers. VC investments in 2003, at $18 billion,declined by 15 percent over the previous year, according to themost recent "MoneyTree Survey" fromPricewaterhouseCoopers (PwC), Thomson Venture Economics and theNational Venture Capital Association (NVCA). First-time funding wasalso down in 2003: 624 companies got $3.4 billion, compared with2002's 792 companies that got $4.3 billion.

But the survey results also show evidence of a turning tide.Investment levels in the fourth quarter of 2003, at $4.9 billion,were at their highest since the second quarter of 2002. Moreover,external economic and market conditions have changed the VC moodfrom despondent to enthusiastic again. Healthier equity marketshave opened the IPO window; according to Greenwich,Connecticut-based Renaissance Capital, more IPOs were completed bythe second week of February 2004 than in the entire first half of2002. And there has also been a thawing in M&A activity, thanksin part to larger companies having more currency with which to dodeals.