Updated (see correction about Keith Benjamin below)

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Highland Capital Partners, a Mass. based venture capital firm that abandoned Silicon Valley in 2001 after the bubble burst, has returned — just the latest sign of what seems to be a pick up in activity here.

The return is apparently not driven by the Web 2.0 fad, though. Corey Mulloy, the partner who is spearheading the effort, invests in medical technology. Highland is bringing over another person, and is looking to hire a venture partner and other personnel here, according to a piece in VentureWire (subscription required).

The firm expects to start investing from its seventh fund of $800 million.

Related note: Keith Benjamin, who opened the San Francisco partner of Highland Capital Partners during the Internet boom, but who was forced out in 2001, now has a blog, called SF Venture. Its another example of a VC who has been blogging for months without us even noticing. Benjamin is now investing at Levensohn Venture Partners in SF.

Update: Our apologies to Keith. As an investment banker at Robertson, he helped take eToys public, and that is how he got to know the Highland Capital folks who had invested in eToys. But he says he joined Highland in 1999, after the firm had made its initial decision to hold its eToy holdings (true, as an analyst, Keith had recommended the stock). eToys tanked earlier than most companies. But Keith says he wasn’t even part of the decision later in 2000 when the firm decided again what to do with its eToys stock. So we are striking this: You may recall the story about Benjamin: He’d reportedly persuaded his more conservative Boston partners not to sell the firm’s stake of about 10 percent eToys. The company was valued at $7.7 billion during the peak, but then the stock cratered. — not good for Benjamin’s rep at the time. He’d apparently convinced his firm to buy even more eToys stock.

Maybe that’s why it took so long for Highland to return. This time, it looks less like a momentum play, which is a good thing. They’re opening an office on Menlo Park’s Sand Hill Road, not San Francisco. And Benjamin, who entered the VC world fresh from investment banking, now has some experience under his belt too — also a good thing.