The venture capital business is trying to battle back, but with mixed success.

On one hand, during the second quarter, 15 IPOs by venture-backed companies raised $899 million, up from just three offerings which raised $232 million in the same period last year, according to Dow Jones VentureSource.

"Venture-backed IPOs hitting double-digits for the first time since 2007 is promising, said Jessica Canning, global research director for Dow Jones VentureSource.

On the other hand, three companies withdrew their IPO registration in the second quarter, most citing unfavorable market conditions, signaling some instability, Canning stresses.

What's more, merger activity seems to be slowing down. In the second quarter, 79 M&As raised $4.3 billion, which was down from 82 M&As that netted $2.9 billion in the second quarter of 2009.

However, the 182 deals that closed in the first six months of this year was a 12 percent increase from the 162 deals closed during the same period last year.

Still, Scott Austin, editor of Dow Jones VentureWire concedes: "The momentum the M&A market gained over the last year has stalled, supporting investors' sense that the venture recovery is vulnerable to setbacks."

He notes the European debt crisis is a likely catalyst for many of the IPO withdrawals and underwhelming public-market debuts posted this quarter as well as the drop in M&A activity as corporations hesitate to close new deals.

Meanwhile, it is also becoming harder for venture-backed companies to exit the public markets.

Those that went public during the most recent quarter took a median of 9.4 years to achieve liquidity, the longest recorded median since VentureSource began reporting on the industry in 1992.

It points out that prior to 2010 the longest median time to liquidity for companies exiting on the public markets was 8.7 years in 2008.

It took a median of 5.1 years for a venture-backed company to reach liquidity via a merger or acquisition in the second quarter of 2010. This is 16 percent more time than the same period last year.

Ultimately, the VC and IPO markets are very closely tied to the sentiment of the overall stock market, for good and bad.