Venture capital investments took an unusual turn upward in Washington state during the second quarter, helped in part by some very large financing rounds in medical device and biotechnology companies. A report released today by Dow Jones VentureSource indicates that $271 million was invested in Washington state last quarter, a 127 percent increase over the prior quarter and about on par with the totals for the same period last year

But don't let the numbers fool you. Industry watchers say most of the money now flowing is being used to prop up existing portfolio companies, rather than finance new startups.

"It is quite slow," said Craig Sherman, an attorney with Wilson Sonsini Goodrich & Rosati who works with startups. "Most of the deals that we are seeing get done are inside rounds."

Nonetheless, another unusual trend appeared in the second quarter numbers. Washington recorded a whopping 40 deals, the most on record in at least six years and more than double the number from the darkest days of the economic recession in the fourth quarter.

The deal total placed Washington in the third slot behind California (248 deals) and Massachusetts (69 deals). The state ranked fourth in terms of venture dollars.

Information technology companies were the most frequently funded with 15 deals, followed by healthcare (including medical devices and biotech) with 12 deals.

The most active local VC during the quarter was Ignition Partners with four deals, followed by OVP Venture Partners which participated in three deals.

Nearly half of the money invested in the state during the quarter went to four life sciences companies: Pathway Medical ($42 million); NanoString ($30 million); Calistoga Pharmaceuticals ($30 million); and MediQuest Therapeutics ($23 million).

The Washington state investment totals followed a national trend. U.S. venture capital investments increased 32 percent over the first quarter as $5.27 billion was invested in 595 deals.

That was still lower than the $8.33 billion invested for the same period last year, but some think the market may be stabilizing albeit at lower investment levels than in years past.

"It seems like it is kind of bouncing around, and from our point of view it feels kind of stable" said J.P. Michael, senior vice president and regional managing director at Comerica Bank. "People aren't taking their cash and putting it in their mattresses like they were in the fourth quarter."

He said they aren't seeing as many early-stage companies raising money these days, and there aren't really any signs that things will turnaround anytime soon.

"The market is not as large as it was," he said. "We always added new companies every year, but I am just not seeing that activity this year. And I think there is just less capital out there from VCs to venture debt to everyone out there is just being more cautious on new financings and new deals."

Nationally, software investments took a bit hit, with investment totals off 52 percent from the second quarter of last year. Biopharmacuetical investing fell 14 percent and "clean tech" investing plummeted 75 percent. 

Still, Washington's strong performance in the second quarter -- with investment totals down just two percent over the same period last year -- was a bright spot when compared to other regions. For example, The San Francisco Bay Area saw investment totals drop 41 percent, Texas encountered a 53 percent declined and New England reported a 39 percent decline.

More numbers will be released next week when the National Venture Capital Association and PricewaterhouseCoopers release their MoneyTree report.

UPDATE: Here's a look at the national numbers via charts from VentureSource.