Last fall, Vonage sought financing to expand its broadband telephony service. It tallied a relatively modest $35 million, but was struck by the level of interest from the venture capital (VC) community.

After "pulling people away from the deal," the upstart went out again just three months later. This time, it socked away $40 million at more favorable terms. And again, would-be investors were turned away, and Vonage hired Deutsche Bank to handle the "onslaught of institutions" that still wanted a piece of the company.

Not all startups can expect a swarm of VCs, but after two-plus years on the sidelines, VCs are raising and investing money again.

In the USA, in the first half of 2004, 82 funds raised $5.8 billion, ahead of last year's pace, according to figures compiled by Thomson Venture Economics and the National Venture Capital Association (NVCA).

"This is the busiest summer I can remember since I've been in venture," said Jeff Fagnan, who recently joined Atlas Venture as a partner after four years with Seed Capital Partners.

More deals are coming through the door and more deals are getting done, he said. What's more, VCs say they have learned some painful lessons from the late 1990s. They say they are more disciplined and more careful -- no more "drive-by due diligence."

"There's a tremendous flight to quality. Companies that have proven themselves with customers and revenue are getting a lot of attention," Fagnan said.

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