April 2004--Venture capitalists made money in the last quarter of 2003--the first time in three years.

According to the National Venture Capital Association (NVCA) and Thompson Venture Economics, one-year returns on venture capital funds averaged 8.1% in the fourth quarter of 2003. This made 2003 the first profitable year for venture capitalist since 2000, when returns averaged nearly 30%.

These statistics are good news for entrepreneurs, indicating venture capital is likely to be more available in the year ahead.

"Venture capitalists are feeling more confident about the future," NVCA President Mark Heesen said in a January press release.

Experts attribute the rise in returns mainly to an improving stock market. The Standard & Poor 500 index rose 26% last year, and the Nasdaq composite index rose 50%. A strong stock market strengthens the IPO market and the merger and acquisitions market, making it easier for venture capitalists to profit.

"There is reason to think that continued increases are sustainable especially if the IPO and M&A exit markets continue to improve this year," said Heesen.

Venture capital funds have been strained in recent years, suffering an average loss of about 38% in 2002 and 32% in 2001. For the three years ending in December 2003, funds took an average annual loss of 19%.

Still, one-year return statistics can be misleading--many investments by venture capitalists don't make money for five to 10 years. So despite the recent slump, venture capitalists are still making money in the long run. According to the NVCA, the average five-year returns on venture funds were about 23%; the average 10-year returns were about 25%.