Stan Boland has been around the block. The 43-year-old Brit was once the chief executive of PC and set-top box maker Acorn Computers Ltd. and launched chip startup Element 14 in 1999, selling it for a cool $ 600 million a year later. But even with his track record, Boland thought it would be tough in today's chilly capital markets to raise money for his new venture, Icera Semiconductor, located in Corsham, England. So he was pleasantly surprised when he and his co-founders closed a deal in February for $ 10 million from London-based firms Benchmark Capital and Atlas Venture after only a few months of prospecting. ''Our key selling point was that we had done it all before,'' Boland says.

That's a qualification they don't dwell on in business school, but it's a sign of the increasingly arid climate for new businesses in Europe. Few startups are being funded, and those that do get money tend to be run by old pros. Gun-shy from the tech collapse and equity meltdown, Europe's nascent venture- capital community, which took off during the late 1990s, is sharply retrenching. The number of venture deals fell by one-fifth in 2002 and total investments dropped 27%, to $ 9.6 billion, on top of a 38% decline the year before, according to new figures from the Brussels-based European Private Equity & Venture Capital Assn. (EVCA). ''We have never been through a downturn this severe,'' says Christopher Spray, a partner at Atlas Venture.

As bad as it sounds, Europe hasn't been hit as hard as the U.S. There, the number of 2002 deals fell 36% and funding plunged by half, to $ 21.2 billion, according to PricewaterhouseCoopers. That difference is cause for some optimism among European venture capitalists, who see themselves closing a long-standing gap in resources and sophistication with North American counterparts. ''We are an industry that has grown up a lot over the past five years,'' says Max Burger-Calderon, executive director for Apax Partners in Munich and current chairman of the EVCA.

What's more, with the tech bubble now a distant memory, European firms say they're seeing better business plans at more reasonable valuations. In 2000, says Kurt Mueller, a partner at Munich-based Target Partners, his firm received 250 business plans a month -- and funded just one because the numbers didn't add up for the rest. Now, it gets 50 proposals a month, and has invested in 10 companies during the past two years. Says Atlas' Spray, ''The pool of entrepreneurs and quality of technical innovation has never been higher.''

Still, tight purse strings raise troublesome questions about the future of entrepreneurialism in Europe. During the Net craze, a cadre of dreamers from Stockholm to Salonika reached for the brass ring. But funding for European seed and early-stage startups plunged 40% last year, prompting many would-be entrepreneurs to hang on to their corporate jobs. The picture is especially grim in rigid economies like Germany and Austria. ''The smartest entrepreneurs don't want to try to create wealth there,'' says Julie Meyer, CEO of London-based Ariadne Capital, which provides funding and counsel to startups. ''They're all out in California.''

A brain drain -- that's precisely what Europe's stagnant economies don't need. ''You have to be worried, because [startups] are where the future jobs come from,'' says Burger-Calderon. Venture investment in the EU is still only one-third of U.S. levels as a percent of gross domestic product. Meanwhile, inflows to private equity funds in Europe have dropped for two years running and are now below 1997 levels. That's partly because fund managers, sitting on $ 32.4 billion in uninvested cash, have sharply curtailed fundraising in the last two years. It doesn't help that the worst equity markets in memory have virtually eliminated the possibility of initial public offerings -- making returns on venture investments far less certain.

Now, some European institutions are starting to fight back. The EVCA recently released a report ranking 15 European countries on the friendliness of their tax and legal systems to venture investment. Britain and Ireland came out on top, France in the middle, and Germany near the bottom. The study is intended to spur reforms. ''The only way we're going to see a new entrepreneurial spirit take hold in Europe is through a strong venture-capital industry,'' says Italian industrialist and former Olivetti chairman Carlo de Benedetti. Brussels is trying to lend a hand, too. The EU-affiliated European Investment Fund poured $ 1.7 billion into venture funds and incubators last year to spur growth of small, innovative businesses.

Perhaps the most promising development in Europe is the emergence of a pool of repeat entrepreneurs like Stan Boland. Every one of the 16 investments made so far from Atlas Venture's $ 600 million Fund VI, has gone to a team with at least one previous startup under its belt. To many longtime venture capitalists, this marks a return to pre-boom sanity. ''The gray-hairs are back,'' quips Jean-Bernard Schmidt, chairman of Paris-based Sofinnova Partners, France's oldest venture-capital firm.

In fact, many seasoned European venture capitalists think the opportunities today are far better than at the peak of the boom. ''This is the perfect time to invest,'' says Target's Mueller. His firm recently scored a tidy return on its investment in wireless Internet provider WLAN.de, which was acquired by Swisscom for tens of millions of dollars. But with no end in sight to the bear market, the old adage has never been truer: Being a successful venture capitalist requires great timing -- and nerves of steel.