According to the annual Venture Insight study released today from Dow Jones VentureOne and Ernst & Young LLP, venture capital investments is showing continued signs of expansion, but "its return to health is still weighed down by nearly 2,000 portfolio companies from the dot-com days that have yet to find exit opportunities. "

They sited slower rates of both company and investor consolidation (5.6% and 3% declines respectively) noting that the number of VC firms has shrunk by 49% since 2000. Meanwhile the expansion is led by new fund raising by the largest firms.

Perhaps the VC are also seeing some competition. I am also seeing a trend for tech companies to raise money from hedge funds (trying to goose their returns) and angel investors in Europe hoping to list their investments on the AIM in London (particularly leading up to the mid-year rule changes).

Bottom Line: Know your potential investors.