Ian Sobieski | University Avenue | Band of Angels | former and current high-tech executives

Other subtler signs are promising. Take the smile-o-meter. The buzz of business activity is back on the streets of Silicon Valley. During a recent, sunny lunchtime on University Avenue in Palo Alto, in the heart of the Valley, business is brisk, with young, khaki-wearing entrepreneurs filling restaurant and cafe seats. And they're smiling.

Still, rebound talk comes as a cautious whisper rather than a full-throated shout. Folks sound a lot like they're afraid to offend politicians. Says Dr. Ian Sobieski of the Band of Angels, a group of about 100 former and current high-tech executives and entrepreneurs of companies who now invest in early-stage start-ups, "Things are not getting worse." That might not sound like much, but for a region and industry so thoroughly pummeled, it's good news. "It's easy to get overly exuberant about this shift [in mood] because the shift is dramatic," says Sobieski. "But it's a shift from thinking the sky is falling to thinking we're all going to be okay."

There's good reason for caution. Perhaps most significant, and challenging, is the fact that many other regions around the U.S. and the world have copied the Valley's successful formula of clustering research universities, friendly governments, venture-capital funding, and legal minds versed in intellectual-property issues. And often, these upstarts offer office space, labor, and services at costs lower than those in the famously expensive Silicon Valley. "We didn't have a patent on that formula," says Hancock.

For another thing, many in the Valley worry that new curbs on immigration, particularly from India, are cutting off a vital source of talent. The plethora of Indian markets and stores all over the Valley shows how important these immigrants are to the area's economy.