Just ask Wenli Yu, CEO of Seneca Networks. While many would-be entrepreneurs go around hat in hand to venture capital firms and find no takers, Yu notes he had no trouble at all. "It was very easy for us," says Yu, who took in $25 million in January from Sprout Group and several other venture firms. "We didn't have a single rejection."

How did Seneca do it? It has an experienced executive team - including founders of Data Labs, which is now part of Lucent - that came up with a good idea: a switch that whisks broadband data in big cities more quickly, easily and cheaply. "The analogy is a transport vehicle from D.C. to New York," says Yu. "While everyone else is building automobile engines, we are building an airplane."

From biotechnology to telecommunications, startups are still attracting investment: Some $700 million in early-stage financing poured into information technology startups in January alone. For good ideas, the climate is no worse than it was a year ago. What has changed is that venture capitalists are now more judicious about half-baked business plans and copycat companies. But VCs are eager as ever to find the next big thing.

The venture faucet continues to flow even as so many other economic indicators have slowed. The Nasdaq is half the stock index it used to be; the Dow is stagnant; consumer confidence is sliding and corporate earnings are sickly. Meanwhile, Federal Reserve Chairman Alan Greenspan last week warned that "downside risks predominate" for the time being - hardly the stuff of a bull market.

But none of it has changed the basics of venture capital investing, which, after all, seeded the great tech boom of the '90s. In a culture obsessed with the stock market, it's easy to stop thinking further ahead than next quarter's earnings. But VCs are still gazing into the future and financing the next generation of blue chips. That's part of what's happening now.

While many investors are rooting risk out of their portfolios, this may be venture financing's finest hour. "It's in down cycles when you make money," says Jonathan Flint of Polaris Venture Partners, which has invested in 26 firms since last March.

It's the same for the die-hard entrepreneurs. VCs still may not return calls from dot-com executives who got in during the last days of the Internet bubble, but they are giving plenty of attention to their favored startups. "Entrepreneurs are being more cautious in starting a company," says Tom Dyal of Redpoint Ventures. "There's actually more time these days for us to engage them."