Last year, of the approximately $60 million that venture capital firm Grotech Capital Group invested, half of the money flowed into new telecommunications deals.

Earlier this month, three of the top venture capital firms in the country -- 3i, Mayfield and Worldview Technology Partners -- formed the Telecom Venture Coalition along with IBM to work specifically on global telecom and next-generation Linux projects.

Telecom? Isn't telecom dead? Certainly, it's still among the most battered industries. But one of the earliest signs of life in a market is when venture capitalists, the ultimate opportunists, begin to embrace it again. Many of them are the same investors who lost big on telecom deals, so they plan their return carefully.

Frank Adams, managing general partner of Timonium, Md.-based Grotech, says he's looking at two particular areas in telecom. About a year ago, Grotech hired Joseph Zell, a former U.S. West executive, to help the firm choose telecom deals.

Adams and Zell are trying to predict what products the local phone carriers will want to buy in coming years, and investing in those companies. They're staying far away from telecom services. Grotech is also interested in investing in new voice technologies, but not expecting such businesses to have a product or service to sell until 2004 or 2005. There's no need to hurry, says Adams, because things won't have turned around until then. Now, he's preaching patience.

"We're waiting for the cycle to pass," Adams says.

At New Enterprise Associates, about 20 percent of last year's deals were in telecom, about half of those in companies that NEA did not invest in previously. Managing Partner Peter Barris, who works in the firm's Reston office, says he's looking seriously at several telecom deals right now.

"It's not a dead space," Barris says. Of particular interest is wireless and, as is the case with Grotech, anything that targets the local phone carriers.

Among the top reasons why telecom is hot for investors now is that chunks of companies can be bought for much less than a few years ago.

"There are some bargains out there," says Barris. "Now there are some companies with proven technology, they need more cash, and the valuations are low." He'd rather put money into an already funded telecom business than in a start-up.

Two of the telecom deals Grotech invested in last year are in what's known as a middle or "C round" stage of development, but Grotech got into them at "A round," or start-up, prices. The worst possible state to be in now, Adams says, is that of an investor that led a company through its A and B rounds and now has its ownership diluted through "post-bubble pricing."

"We see no evidence values are starting to go up," Adams says cheerfully. Telecom "is absolutely our platform and strategy for '03."

Barris admits many of the VCs are swooping in on such deals, but that's what his business is all about.

"There's a little vulture capital going on," Barris admits.

Columbia Capital, known for its focus on telecommunications since the fund's inception 13 years ago, has not fled from its bread and butter, even though these past few years have been tough. In 2002, almost all of about 10 deals done by Columbia Capital were in the telecom industry. Columbia invests in all things telecom: services, software and hardware.

"We've had a rough two years," says partner Karl Khoury. "But the strategy will not change at Columbia."

About 75 percent of those deals done last year by Columbia, however, were in current portfolio companies.

"There was less time to look for new deals," says partner John Siegel. He says there has been a natural telecom evolution. First the weakest companies failed, and now the VCs are feeding the survivors. While the sector as a whole still looks gloomy, Siegel says some individual businesses and types of firms are showing glimmers of promise.

Some of Columbia's favorite new deals are in areas people in the past would have said are boring, such as software that helps telecom carriers better manage the costs and revenues of their networks. That's the business of Vibrant Solutions, a Fairfax company in which Columbia Capital invested. Vibrant scored $14.5 million in financing in September from Columbia and other VCs, including Grotech, which led the round.

Grotech, Columbia and NEA all have in common an investment in Megisto Systems of Germantown, which creates software for data services to be sent over wireless networks.

Julia Spicer, executive director of the trade group Mid-Atlantic Venture Capital Association, says she has seen some venture capitalists particularly interested in telecom deals that consolidate several companies, producing with a stronger balance sheet. She warned, however, that telecom is not something she'd recommend new investors or funds new to the industry try now all of a sudden.

"It's not for the meek," says Spicer, who in former lives worked at Columbia Capital and GTE. "It's better served by those who know the space."

Shannon Henry's e-mail address is henrys@washpost.com.

Peter Barris, managing partner of New Enterprise Associates, is contemplating several telecommunications deals.Partner Karl Khoury says Columbia Capital will not change its telecom strategy.