VC investment climbs to six-year high as clean tech, life sciences and Internet shine

Venture capital investing climbed to a six-year high in 2007 as VCs poured more money into the clean technology, life sciences and Internet sectors. 

The latest MoneyTree survey showed that VC investment rose to $29.4 billion last year, up 10% from 2006 and the highest total since 2001. 

That's good news for entrepreneurs. But the numbers also hint at a potential bubble inflating for green tech, as well as for late stage valuations. 

The mad rush into clean tech continued last year, with investment up 47% to $2.2 billion. The percentage rise was by far the biggest for any market category, as investors made bets on alternative fuels and related technologies.

While that total is still relatively small compared to other categories, it already has investment bankers considering the possibility of a "green bubble," as we reported here earlier in a story based on another VC funding survey. 

The life sciences category also showed above-average growth, powered by a surge in medical devices, as investors poured in a record $9.1 billion, up 20% from 2006. Life sciences investment accounted for 31% of all VC investments, also a record.

The grab for a piece of social networking and other Web 2.0 companies drove Internet investing up 12% to $4.6 billion, while software investing climbed 4% to $5.3 billion.

Taken together, the totals showed that 2007 was a good year to be an entrepreneur. 

For some investors, however, a surge in late-stage investing suggests that too much money may be chasing too few quality deals. Late stage financings rose 24% to $12.2 billion, accounting for 31% of all VC investment.

Early-stage investment also rose at a healthy 27% rate, to $5.2 billion, while seed stage financing was flat at $1.2 billion, even though the number of seed deals shot up to 415 from 342. 

"I have mixed feelings about the numbers, says Matt Ridenour, a managing director at Momentum Venture Management. "The overall number is a good sign for the industry, but you have to think that late-stage valuations are getting forced higher," Ridenour told me when he stopped by the Vator.tv  studio this week to tape an interview.

The annual survey is put together by the National Venture Capital Association and PriceWaterhouse Coopers, based on data supplied by Thomson Financial.