The venture capital well continues to run dry. Only 22 venture deals were completed in Washington state last quarter, the smallest number since the third quarter of 2003.

The amount of money also has fallen off a cliff. Last quarter, venture capitalists invested $100 million in the state, which compares to $392 million for the same period last year, according to a report released today by PricewaterhouseCoopers and the NVCA. And nearly half of the money in the last quarter went to one company: a $40 million venture round in Kirkland-based Pathway Medical Technologies.

A second report released today by Dow Jones VentureSource showed a similar trend line, with 22 companies in the state receiving $114 million. That compared to 27 deals and $247 million for the same period last year.

Despite the negative spiral in the past 12 months, Seattle area venture capitalists expressed optimism that things might be turning around. For example, both reports showed an increase in investment totals over the fourth quarter.

Lucinda Stewart, a managing director at OVP Venture Partners in Kirkland, also said that Washington is faring better than the nation as a whole which saw larger declines in deals and dollars.

Nationally, venture capitalists invested $3 billion during the first quarter, a 47 percent decline from the previous quarter. That marked the lowest investment level since 1997.

"Venture investing has continued to happen. It hasn't stopped," said Stewart, whose own firm recently participated in the $9 million funding of digital pen software maker Adapx.

Nine seed or early-stage companies received funding during the first quarter in the state, while 13 expansion or later-stage companies attracted cash. The leading sector was software, with seven deals.

Greg Gottesman, a partner at Madrona Venture Group in Seattle, said a number of the firm's portfolio companies "blew away" their first quarter numbers.

And he was encouraged with the initial public offering this week of Rosetta Stone, a language software company that performed well in its stock market debut. That followed a recent dismal report from the NVCA and Thomson Reuters that no venture-backed companies in the entire country completed an IPO during the first quarter.

Gottesman described the overall exit markets as "soft," though he's hopeful that the market will shift and the window will once again open for IPOs. He didn't have a specific prediction on when that might occur, though he said venture investors are on the prowl for opportunities despite the tough economy.

"Things are still happening. Deals are still getting done," he said. Venture firms also are spending a lot of time making sure that existing portfolio companies have enough cash to make it to the end of the year or to cash flow positive. And while Gottesman and Stewart admitted that valuations on startup companies are trending lower, both said that's not such a bad thing.

"This all isn't bad because it is causing people to be more rational," Stewart said.

Research conducted by Buerk Dale Victor's Andy Dale shows some of the optimism, with the Seattle venture capitalist saying that a recent survey of 15 local firms showed that they collectively planned to do more than 20 new venture deals this year.

Dale, for one, thinks the mood has shifted. He says VCs no longer feel like they may be "catching a knife" falling into a new depression.

"We are still hunkered down, but at least it feels like a bottom," he said.

Here's a pie chart from Dow Jones VentureSource showing the split of capital by region:

The below chart shows sharp declines in U.S. venture investing over the past two quarters.

Here's a list of the companies in the state that raised cash in Q1 from the MoneyTree report: