Is it getting sunny again for startups? (Flickr photo via lrargerich)

I just finished writing on a possible resurgence in the tech M&A market when along comes yet another piece of good news. Fenwick & West today issued results from its quarterly venture capital survey, and lo and behold rays of sunshine are once again appearing in the battered industry.

The Silicon Valley law firm, which also has offices in Seattle, noted in its survey that "up rounds" exceeded "down rounds" for the second quarter in a row. That's good news for entrepreneurs who are looking for bigger valuations on their companies, and for venture capitalists who've had to carry the load for more than a year on their existing portfolio companies.

An "up round" is a deal in which investors place a higher valuation on the company than the previous round, signaling progress and increasing value in the business. According to the survey of Silicon Valley companies, 47 percent of deals during the fourth quarter were classified as "up rounds" while 30 percent were "down rounds." Twenty three percent of the rounds were considered "flat."

That compared to the previous quarter when 41 percent of the deals were "up rounds" and 36 percent were "down rounds."

Even more impressive is that more than half of the deals in the Internet/digital media and software categories were up rounds during the fourth quarter.

Granted, the survey is based on 112 transactions in Silicon Valley, and deal terms do vary by region. But, from what I am hearing, the trend lines are holding somewhat true here in the Pacific Northwest as well.

Venture capitalists and entrepreneurs are expressing more optimism in 2010, which could fuel higher valuations. Also, a slight opening of the IPO and M&A windows is causing some excitement in startup circles.

Here's a closer look at up and down rounds over the last two years.

[Flickr photo via lrargerich]