The stock market may finally be showing signs of life. But when it comes to investing in startup companies, things are looking kind of dead. At least that's the finding from a report released today by Dow Jones VentureSource, though some Seattle area investors say things are actually starting to pick up. U.S. venture investments fell six percent during the third quarter when compared to the previous quarter, and down 38 percent from the same period last year.

Washington state's tech heavy venture industry took an even bigger hit. Venture capital investments totaled $147 million, down 48 percent compared to the second quarter and off 47 percent compared to the same period last year, according to the report.

The number of deals also fell, indicating that startup companies may be bootstrapping their businesses until better times (and higher valuations) emerge. Just eighteen deals were completed during the quarter. That compared to 40 deals during the second quarter.

Historically, the third quarter is among the slowest as venture capitalists and entrepreneurs take vacations. But 18 deals represents the smallest third quarter tally since 2006 when 15 deals were done.

Bill McAleer, a co-founder of Seattle's Voyager Capital, was surprised that the numbers fell as much as they did.

"I'm a little surprised that the dollar level is so low as we continue to see good activity levels and interesting opportunities," McAleer said. Voyager, for example, closed a new deal during the third quarter and currently has a term sheet out on another.

"Follow on rounds, particularly with Series B companies continue to be challenging, so perhaps that accounts for some of the change," said McAleer. "Also companies are requiring less capital in general, so suspect that average deal sizes are trending lower."

In fact, McAleer's analysis is right on the mark. The median deal size came in at $5 million last quarter, down from $7 million during the third quarter of last year. And the $5 million deal size was the lowest on record in a decade.

Gary Ritner, an angel investor who runs the Puget Sound Venture Club, also has seen a turnaround in recent months which makes the significant drop in cash raised somewhat perplexing."Deal flow is very good, including quality companies," said Ritner, who has seen some oversubscribed deals in recent weeks. "Angels are starting to invest again."

Healthcare was the most active segment in the state as six deals were completed, totaling $79 million. That was followed by information technology, which came in with four deals totaling $46.5 million.

Washington state ranked sixth in the number of dollars and deals,

Jessica Canning, director of global research at VentureSource, noted in a release that the slow recovery for the venture capital industry has "faltered."

“As liquidity and fundraising lag after the economic meltdown in 2008, investors have no choice but to keep a tight rein on investments until the industry is on more solid ground,” she said.

Meanwhile, more money is flowing into later-stage ventures. Those later-stage companies attracted 59 percent of venture dollars during the quarter, up from 52 percent during the same period last year. Meanwhile, the proportion of dollars going to early-stage deals fell to 16 percent.