Remember when venture capital firms invested in Internet companies? Cast your mind back a few years and you will recall a time when normal valuation metrics and rational thought seemingly went out of the window. When over-hyped pan-European fashion etailer went bankrupt having burnt its way through a whopping £100 million of venture capital, it seemed to perfectly epitomise the excesses of the dotcom boom.

It all seems a long time ago, but now investors who retained faith in their internet-related portfolio companies are coming through as the market returns. In the US there's of course Google, but even in Europe there are now signs of a revival. They first became visible in January, when Iliad, an Internet service provider, saw its shares rise 29 percent on its first day of trading on Paris Euronext following a heavily oversubscribed IPO.

Since then, venture capitalists have jumped on the bandwagon. Last month, Innovacom and Banexi Ventures exited their investment in online shopping comparison service Kelkoo when it was sold to Yahoo for €475 million. The sale reportedly delivered a fivefold return to the venture capital firms, which had provided €4 million in first-round funding in December 1999.

Also last month, Carlyle Europe Venture Partners and Crédit Lyonnais Private Equity (CLPE) boasted an IRR of over 30 percent when they sold online travel business Egencia to rival Expedia for an undisclosed sum. Carlyle first backed the firm in 2000 and was joined by CLPE in subsequent funding rounds in 2001 and 2003.

Vladimir Lasocki, who led Carlyle's investment in Egencia, says the stock market revival and increased corporate confidence are now providing Internet companies with possible exit routes for the first time in several years. “Trade buyers realise that they have to act now because the stock market has become a credible alternative for successful online businesses,” he says.

Many technology bellwethers have large amounts of cash on their balance sheets following successful IPOs – but have been reluctant to spend that cash on acquisitions until it became clear which potential targets had best survived the downturn. Those that fall into the latter category are now able to reap the benefits as shareholders apply pressure to larger companies to identify paths to further growth.

The upward trend has so far been most evident in France, but it now appears to be spreading to other parts of Europe, too. In the UK, Newport Networks, a specialist in voice-over-internet technology, has announced a planned £35 million IPO on the Alternative Investment Market – despite not having any customers or revenues at the time of the announcement. If that doesn't sound like 1999…

Amidst a venture capital environment abuzz with life sciences investing, Boston – based Dynogen Pharmaceuticals in April announced a $50 million (€42 million) second round of fundraising to finance the company's development of a pipeline of drugs that treat bladder and bowel disorders, and sexual dysfunction. Dynogen's big announcement comes only a few short weeks after Palo Alto, California-based Jazz Pharmaceuticals scored a walloping $250 million (€206 million) in series B financing – one of the largest second rounds ever for a drug company without a marketable product – for developing and commercialising drugs for treating neurological and psychiatric disorders.

The two pharma fundraisers are attracting attention in the venture capital industry because some market experts are wary about the formation of a potential life sciences investment bubble. In the case of Dynogen, news reports said the company had sought only $25 million to $30 million. The overshot of Dynogen's original target is being seen by some as reminiscent of the late 1990s, when tech companies received far too much money than they needed or wanted. Jazz's funding is raising eyebrows as well because many in the venture capital sector are debating whether too much money is flowing into these types of pharmaceutical companies, which license and commercialise the products of other companies rather than follow through with their own drug discoveries.

Moreover, Jazz's funding came from atypical early-stage investors Golden Gate Capital, Thoma Cressey Equity Partners and Kohlberg Kravis Roberts, which led the fundraising in a life sciences arena that buyout shops tend to avoid altogether. KKR's involvement also happens to be its first ever pharmaceutical venture in its nearly three-decade history.