U.S. venture funding up nearly 11 percent in 2007

Calling all entrepreneurs: follow the money.

If you did, that road down the IT path would likely lead you to clean-tech and Internet-specific businesses, according to results of the 2007 MoneyTree Report released Friday by PricewaterhouseCoopers and the National Venture Capital Association.

U.S. venture capitalists invested a total of $29.4 billion in 2007, up 10.8 percent from the previous year. That marked the fourth consecutive year of growth. The number of deals reached 3,813 last year, a modest rise of 5 percent over a year earlier.

Clean-technology companies attracted $2.2 billion in investments last year, a 47 percent jump over the prior year. And the number of clean-tech deals rose by 58 percent to 202 venture financings last year, compared with 2006 .

Internet companies, which rely on a business model that's largely dependent on the Internet, also attracted a substantial slice of venture funding last year, according to the report. This sector attracted $4.6 billion in funding, accounting for a 12 percent increase over the previous year.

The software sector, which historically grabs the largest slice of venture funding, had less than spectacular year in 2007. Funding levels for the software sector remained virtually flat, rising to $5.3 billion with 905 deals, compared with $5.1 billion for 920 deals in 2006.

"Software is still the largest segment for funding, even though it is flattening out," said Deepak Kamra, a venture capitalist with Canaan Partners. "Within software, software as a service and open source are doing well. Open source is a cheaper way for companies to develop applications."

Venture capitalists get their investment back through an IPO or sale of their portfolio company. Last year, venture capitalists were able to ride the IPO ride on several notable deals.

"The market was good for IPOs in 2007, but now we're concerned about the IPO market shutting down," Deepak said. "Ultimately, the IPO market will come back."