Are the lemmings back in venture capital?

Venture capitalists expect a bullish year in 2007 and appear to be ready to stampede into clean technology as well as energy development, according to the first national survey of VCs conducted by the National Venture Capital Association.

“Everyone is talking about clean technology and energy,” Mark Heesen, president of the venture group, said in an interview with WRAL Local Tech Wire. “I was stunned by the 92 percent who said they expected increases in that sector next year.”

With oil prices up and demand for alternative fuels such as ethanol increasing, companies and investors are lining up to take advantage of potential financial gushers. Heesen cautioned his compatriots to look before they leap, however.

“We are accused of being lemmings sometimes,” he said. “Hopefully, we’ll not jump full force into the energy sector.”

Thus far Heesen has seen VC firms play energy smarter that they did the “dot com” eruption of the late ’90s.

“VCs are bringing in experts before they invest. That’s so different than during ‘dot com’ in that regard,” he explained, “but if 92 percent say they are going to invest, you have to sit back and analyze that a little bit.”

Based on the result of more than 200 surveys, the NCVA said 2007 apparently would be a good year for Internet and media companies as well. Some 70 percent of the VCs expect increases in Internet company financing, and 69 percent say investing will grow in media.

“In the Internet, we’re still at the tip of the iceberg,” Heesen said. “People are still excited about the possibilities there.

“To be very honest, that’s an area VCs already know,” he added. “You kind of gravitate to those things in which you have expertise in. The VCs have done well there financially, and they also understand what the sector is all about.”

Look for software investing to dip, however. Sixty three percent of those surveyed expect software deals to fall off, while only 23 percent predict an increase.

Medical devices (56 percent), semiconductors (50 percent), biotech (49 percent), wireless and telecom (46 percent) lead the other decliners.

The VCs also expect deals to be funded at a similar rate if not higher than seen in 2006. Venture funding topped $19.2 billion through the third quarter, and 2006 could be the biggest year since $40.5 billion was invested in 2001.

Some 29 percent of VCs surveyed expect between $30 billion and $39 billion to be invested in 2007, and another 69 percent predict between $20 billion and $29 billion.

However, the exit routes may not be much better than now, with the forecast about initial public offerings being quite mixed.

“It’s a true split on IPOs,” Heesen said, with 50 percent in the survey predicting a recovery and 47 percent expecting the market to remain sluggish. “That’s reflective of a couple of things.

“One is the VCs have companies in registration and they want to see that window open so they are wishing with their vote. When I look at what is going on, I see more than a crack opening.

“We are seeing more companies registering,” he added. “Two years ago, they were registering to go public as a ‘for sale’ sign to acquirers. That kind of game is over now. If they are serious about being acquired, they aren’t going through that [IPO] effort.”

Another trend that VCs in the poll showed they expecte to continue in 2007 is more investment in China (93 percent) and India (92 percent).