The venture capital ecosystem is continuing its recovery from the 2016 slump at a steady pace, but the past quarter has brought a mixed bag of developments.

That’s the conclusion from a recently released study by Fenwick & West LLP, a prominent law firm serving the tech industry.

First, the good news: The total amount of capital going to startups is up. Fenwick has produced an average second quarter estimate based on data from VentureSource, Pitchbook and MoneyTree that shows total funding rose 25 percent from the previous quarter, to $19.2 billion. That’s in line with the trend shown by CB Insights’ second-quarter report, which determined that total financing volume reached $18.4 billion on a 27 percent quarterly increase.

Broken down to individual investments, Fenwick has found that size of the average round jumped by 64 percent from the first quarter. That’s a significantly more than the 54 percent average growth recorded for the latter period, which further reaffirms the overall pattern of improvement in venture activity.

But not every metric is up. The study’s average growth estimate indicates that while total investment rose, the number of deals in the second quarter dipped 1 percent to 1,399. CB Insights reported an 4 percent quarterly decrease and a total of 1,152 rounds.

Growing competition

The decline in deal volume is part of several factors that made venture capitalists’ work trickier in the second quarter. CNBC interpreted the data to mean that it’s becoming more difficult to get in on the rounds that attract the most interest. Further complicating the situation is the fact that new investors keep entering the race.

Fenwick projects that 2017 is on track to see more first-time venture funds form than any other year in the past decade. This in turn appears to be fueling another trend: Startups are finding themselves in a stronger position to negotiate term sheets.

The study found that the percentage of funding rounds with multiple liquidation preferences, an arrangement generally intended to favor investors, sank to the lowest point since the fourth quarter of 2014. This happened even as returns proved more elusive for venture capitalists in the second quarter.

Fenwick cited VentureSource data that showed the value of mergers and acquisitions declined from $25.2 billion in the same period a year ago to $19.2 billion. The number of public offerings meanwhile more than doubled on a sequential basis to 18 in the second quarter, but the total capital haul dropped considerably. This was mainly the result of disappointing offerings from Snap Inc., meat-kit delivery provider Blue Apron Inc. and a few other high-profile companies.

The bottom line: The venture business has some ways to go before it has a chance to return to the records set during the mid-2015 startup funding boom.

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