While VC funding is declining both in number of funds and dollar amounts, the number of Angel Investors and the amount they are investing has been increasing significantly. Angels also invest over a much wider geographic area than VCs. Here's what Jeff Sohl at UNH reports:

http://www.newswise.com/articles/unh-center-for-venture-research-u-s-angel-investor-market-on-solid-path-of-recovery-in-2011