Venture capitalists are perennial optimists, so it’s no surprise that a new report on their activity due out early Wednesday manages to find a glimmer of hope among the stagnant numbers.

According to the latest MoneyTree report from PricewaterhouseCoopers LLP and CB Insights, investment in U.S.-based venture-backed companies rose in the first quarter from the last three months of 2016. Investors, who include both venture capitalists and corporations, put some $13.9 billion into startups, up 15 percent from the fourth quarter.

The number of deals rose 2 percent, to 1,104 companies — the first uptick in a number of quarters, according to PwC.

“We’re still seeing a lot of money coming into the system,” Tom Ciccolella, PwC’s U.S. venture capital leader, told SiliconANGLE. It’s “not a downward spiral, more of a flattening,” he added.

Still, the bigger picture shows little other reason to think a return to the go-go days before the middle of last year is coming anytime soon. For one thing, much of that 15 percent jump in U.S. funding came from 17 megadeals of more than $100 million, up from 12 megadeals in the fourth quarter. That’s good for those companies, which are later-stage firms looking ahead to an acquisition or an initial public offering of shares, but it doesn’t indicate a broad-based recovery in investing.

Moreover, compared with a year ago, the trend remains negative. That $13.9 billion is down 11 percent from first-quarter 2016, representing the second-lowest quarterly total in the past year two years. And the number of deals fell 15 percent from a year ago.

While some regions such as Los Angeles/Orange County, saw a rise in deals and dollar investment, Silicon Valley was flat and the San Francisco/North Bay Area hit an eight-quarter low. Overseas fared better, with total global dollars rising 22 percent from the fourth quarter, again thanks to megadeals especially in Asia.

Anecdotally, several venture capitalists told SiliconANGLE that the declines are more a return from the overheated frenzy of 2015 and much of 2016 than a harbinger of a more sweeping decline. Venky Ganesan, managing director of Menlo Ventures, said he thinks the Trump election might have literally given VCs pause on investing in the fourth quarter.

“The election results were a surprise for many people,” he said. “They initially said it was a disaster. But they realized it might be good economically” in terms of potential trade and regulation reduction benefits, and started investing again.

Also, IPOs are showing some signs of life. Although the first quarter saw some high-profile IPO successes such as MuleSoft Inc., overall the first quarter saw only four tech companies go public. But Okta Inc. went public Friday, and Yext Inc. is due to go public later this week, spurring some hopes for a rebound that could draw in a new round of startup investment.

Still, that’s not happening yet. Indeed, seed funding hit a low of 25 percent of U.S. deals in the quarter, down from 35 percent in the third quarter of 2015. Putting the most positive spin on that, Ciccolella said, “you can go longer on seed-stage funding than you could a few years ago” thanks to lower costs from developments such as cloud computing services.

AI investment levels and number of deals

Some bright spots shined through the gloom. Hardware startups were among the megadeals, such as BOT Home Automation Inc., maker of the Ring smart doorbell, which raised $109 million, and electric bus maker Proterra Inc., which raised $140 million. However, as Ciccolella noted, the reason for the big financings is that, well, they need the money. “They’re getting to a level of maturity that they need the financing to keep momentum going,” he said.

Artificial intelligence companies also remained on an upswing, reaching an eight-quarter high of $820 million invested in 90 companies. And cybersecurity staged something of a return from a crash at the end of 2016, with 50 deals worth $655 million.

Photo: Robert Hof