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Which way is the venture capital pendulum swinging? That's the question I'll be trying to answer this morning at a BDO networking breakfast with bankers, lawyers, accountants and other business leaders.

Luckily, this is the week that all of the major research firms release their quarterly venture capital reports, so I am coming into the talk armed with some data. Today, the first of the reports -- the CB Insights Venture Capital Activity Report -- showed a renewed optimism during the first quarter as venture capitalists invested $5.9 billion across 731 deals. That's a huge increase over the first quarter of last year, when just $3.9 billion was invested in 483 deals.

Of course, the economy was mired in the depths of a nasty recession during the first half of last year and most venture capitalists were just sitting on the sidelines. But there are signs of hope, with the data gurus at CB Insights writing in today's report that "the psychology and sentiment of entrepreneurs and venture capital investors continues to improve, albeit cautiously."

In Washington state, venture capitalists certainly are living by the "cautiously optimistic" adage. The number of deals and dollars increased slightly in the state during the first quarter of 2010. VCs pumped $138 million into 30 deals, with the vast majority of that money (a whopping 75 percent) going to Internet related companies, according to CB Insights.

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By comparison, VCs invested $115 million in 21 deals in the state during the first quarter of last year.

In fact, each of the past three quarters have all registered between $135 million and $165 million. That's well below the recent historical trends (2005 to 2008) when the average quarterly investment was above $250 million per quarter.

Is that bad news for the industry? Not necessarily, according to the folks at CB Insights.

"There is some belief that the VC asset class has perhaps reset at a lower but ultimately more sustainable and healthier level," according to the authors of today's report.

Fueling the optimism is a semi-resurgent IPO market. So far this year, 29 companies have completed IPOs -- which compares to 63 last year and 43 in 2008, according to Renaissance Capital's IPO Home. At the current pace, there's a chance more than 100 companies will go public in 2010. And while that's good news for entrepreneurs and investors who use public offerings to cash out, it would still be well below the period from 2004 to 2007 when more than 200 companies went public in each of those years.

California remains the top dog when it comes to venture capital investing, with the state attracting 49 percent of all venture capital dollars ($2.9 billion) during the quarter. That was followed by Massachusetts with 15 percent ($898 million), and New York ($319 million) five percent. Here's a look at some more charts from the CB Insights study:

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