The data on venture capital financing remains abysmal, and plenty of indicators suggest tough times ahead.  According to the National Venture Capital Association (NVCA), just 25 funds raised $1.7 billion in the US during the second quarter.  That is the lowest funding aggregate since 2003, and by stark comparison, 2007 produced over $36 billion in dry powder.

Sounds like a seriously frozen pipe, and more cause for bootstrapping.  Then why are a string of music startups – traditionally a high-risk group – suddenly securing sizable funds?  Look no further than MOG, which is now getting ready to officially announce a $5 million round from Menlo Ventures.

Think this is just funny money?  Not according to players like MOG chief executive David Hyman, or Menlo financiers like Sonja Hoel Perkins.  Suddenly, big-name Menlo is ready to jump into the dicey music game, a punishing path for so many VCs.  Funny or not – does that sound like illiquidity?

Others are also grabbing noticeable rounds.  Just this week, Rightsflow secured a $1.5 million purse, and Audible Magic (albeit less directly tied to music) wrestled down $1.28 million.

Just small-time bets?  Not at Spotify, which just rallied $50 million (30 million pounds) at a broader valuation north of $240 million (148 million pounds).  Perhaps Spotify hits the jackpot at the hands of Facebook, and everyone gets rich.

Plan B?  Spotify lacks a real revenue model, and its monetization plan is mostly theoretical at this point.  Meanwhile, the last Facebook favorite – iLike – was sold for relative scrap to MySpace.

Tricky terrain, and most will lose cash on these bets – just like before.  And that is the whole point.  Suddenly, money that was once paralyzed on the sidelines is jumping into a high-stakes game.  Investors are getting lured by music again, partly because of the thrill of cracking an impossible riddle.  Sounds like an earlier era, one that featured a much richer pipeline than today.

Perhaps the biggest example is playing out in Stockholm right now.  Hans Pandeya and Global Gaming Factory appear ready to toss nearly $8 million at a long-shot Pirate Bay legitimization plan.  Among venture capitalists, that sort of ambition is reminiscent of ‘frothy’ climes, a word rarely uttered in 2009.

Paul Resnikoff, Publisher.