Venture capital funding soared to record heights in the first quarter, but don't expect the funds to flow as freely for the next two quarters. A bear market, a weak IPO outlook and carnage in the tech sector have changed the VC scene. You'd never know anything was wrong by looking at the latest VC snapshot. According to PricewaterhouseCoopers Money Tree Survey, released May 15, venture capital funding soared to $17.22bn (£11.46bn), well above fourth quarter levels. The funding quadrupled year-ago totals. It won't last. Private equity valuations are coming down along with the public markets and VCs are being a little more discerning these days. VCs are expecting both the private and public equity markets to take a summer hiatus as interest rate concerns are sorted out. Bill Sprague, managing director of New York-based Crest Communications, said four companies in his portfolio were recently registered for initial public offerings. Two companies withdrew their plans and one was postponed. The strongest of the bunch, Web hosting firm Interland, plans a road show in the next couple weeks. Although Interland is losing money, revenue is ramping up quickly. More importantly, however, comparable companies to Interland have been relatively stable in the market downturn. Competitors to Interland include Globix, Exodus Communications, Navisite, USinternetworking and Verio among others. "The IPO market will return when the volatility goes away," said Sprague. "You can judge a company better when it has a stable value." The volatility has forced Sprague and other venture capitalists to reevaluate their portfolios. Funding concept companies is out and profits are in. "Everybody has had to take three steps back," said Sprague, who invests in communications companies. Brad Garlinghouse, general partner for CMGI's @Ventures unit, said the great "public venture capital" experiment of 1999 and early 2000 is over. "You can be fairly critical of VCs," he said. "A lot of companies that weren't ready to go public were going public. I don't think the public market was ready to play venture capitalist." It shows in @Ventures' own portfolio. MotherNature.com, a health and wellness e-tailer that went public in December, has been hammered in the business-to-consumer shakeout. Ventro, formerly known as Chemdex, had a nice run, but has been walloped along with other business-to-business stocks. Ventro closed Friday at 15, well below a 52-week high of 243 1/2. Vicinity and Critical Path are also @Venture companies and trading well below 52-week highs. Garlinghouse said VCs are generally shuffling their portfolios and combining properties to create sustainable businesses. "We're all looking at ways to create more profitable entities," he said. Despite the stock market woes, no one is panicking. VCs acknowledge the days of making $12 on every $1 invested are gone, but the historical $5 on every $1 still isn't bad. Garlinghouse said @Ventures isn't changing its philosophy. If you chase hot buzzwords -- currently optical networking and wireless -- you'll get stuck when investors get bored. CMGI's venture arm currently has about 80 percent of its portfolio evenly split between B2C and B2B companies with 20 percent focused on infrastructure. The portfolio will likely be split into thirds long-term. "We believe in the balanced approach," he said. "We don't want to get caught in the whims of the market." What do you think? Tell the Mailroom. And read what others have said. See ZDII for US tech investor news. See techTrader for more technology investment news, plus quotes and research.