The National Venture Capital Association gathered comments from numerous venture capitalists about what to expect in the new year.

Here’s what they had to say:

ABOUT SECTORS FOR INVESTMENT:

“For the last few years, we’ve sought out investment opportunities in companies developing technologies that will leverage the widespread adoption of high-definition television. Given what we know about the consumer electronics marketplace, we believe that many companies in this sector will make a leap forward in terms of gaining market traction in 2007. And, we see exits in this sector increasing." – Kate Mitchell, Managing Director, BA Venture Partners

"2007 will be the year in which the RFID (Radio Frequency Identification) industry  enters its hyper-growth phase as new low-cost and high-performance RFID semiconductor chips hit the market. These chips can guarantee the integrity of products as diverse as prescription drugs, agricultural products and consumer electronics by providing a secure tracking history. This has the potential to eliminate counterfeiting and thievery, while ensuring greater privacy than exists today with existing transactions." – Patrick Ennis, Managing Director, ARCH Venture Partners

“IT has moved from the boiler room to the engine room; IT investments will continue to be attractive in 2007 and beyond as IT budgets have finally become aligned with enterprise-wide business goals and operations, with the resulting integration more resistant to cuts. The FTVentures IT Outlook, a survey of CTOs/CIOs at leading global financial services companies, indicates that priority areas for 2007 include business intelligence, several aspects of security and compliance, outsourcing and off-shoring, and effective service-oriented architecture.” – Jim Hale, Founding Partner, FTVentures

“Returns from biotech and digital media were disappointments over the last two years. That’s over. Both will lead returns over the next two years.” – Carl Eibl, Managing Director, Enterprise Partners Venture Capital

"The cost of CO2, as a greenhouse gas, comes into focus, and driven by the solar IPOs, VCs ask not whether they are in clean tech, but if they can afford not to be." –Erik Straser, General Partner, MDV-Mohr Davidow Ventures

"You’ll see more and larger deals. Private equity investors are seeking to unlock the value in businesses that de-levered their balance sheets post-2000 and are now capable of replacing a significant portion of their market capitalization with inexpensive debt." – Walter Kortschak, Managing Partner, Summit Partners

“With opportunities abroad abounding, many senior VCs are spending less time in the U.S. and focusing their energies on developing outposts in China, India and Eastern Europe. This, along with the usual ‘call in rich’ VC retirement cycle, will result in a thinning of experienced, company-building GP talent on the home front.” – Jeffrey Bussgang, General Partner, IDG Ventures Boston

“Corporate spin-offs will be the best source for new venture capital investment opportunities in 2007, in both the life science and IT sectors. They provide seasoned management, strong patent protection and mature products at a discount. These in turn lead to increased capital efficiency and shorter times to liquidity.” – Jim Healy, Managing Director, Sofinnova Ventures, Inc.

“Clean tech companies will continue to attract increased attention and investment dollars in 2007 as investors are attracted by the undeniable underlying market trends driving innovation in areas like alternative energy, clean water, and energy efficiency. VCs, debt providers, private equity firms, hedge funds, and public investors will have appetite for investment in this sector. With capital readily available, entrepreneurs and technologists will be drawn in, increasing the pace of innovation while at the same time introducing opportunities with increased associated risks. Significant money will be made and lost in pursuit of these opportunities. The winners will be focused on creating long-term value rather than playing the momentum of the market.” – Bill Wiberg, General Partner, ATV

“We are optimistic about 2007. The VC business is just fine. Crosslink is coming off its busiest year since inception in terms of new companies invested in. Our 2000 Fund is doing well, very profitable. IPOs are tough to come by—we had one exit with Omniture. Some deals are hot, but most are not. Nothing new, this is the investment business. Building good companies still requires much work. A little luck helps too.” – Michael Stark, General Partner, Crosslink Capital

“New York City will become more prominent from a geography standpoint. From an industry standpoint, digital media and alternative energies will continue to grow.” – Chris Greendale, General Partner, Kodiak Venture Partners

ABOUT EXIT STRATEGIES:

“I predict that 2007 will be the best year for U.S. venture-backed-company IPO’s since the bubble popped in 2000, but it won’t be as good as it could or should be.” – Dixon Doll, Managing General Partner, Doll Capital Management

"Revisions to Sarbanes-Oxley, as it relates to small companies, will open the IPO window, allowing nearly 100 high-potential, venture-backed, growth companies to go public in 2007, the highest level since the bubble. Without reform, the United States will continue its tragic fall from leadership in public growth equity capital markets. Government regulation is literally snuffing out the fuel that fires our innovation economy." – David Spreng, Managing General Partner, Crescendo Ventures

“PE firms are the new M&As, M&As are the new IPOs, IPOs are the new foreign markets.” – Gerry Langeler, Managing Partner, OVP Venture Partners

"The exit market will remain robust for venture-backed companies that seek non-IPO exits, so look for an active trade sale market and a lot of interest from the over-funded LBO market." – Charles Rothstein, Senior Managing Director, Beringea, LLC

“Smart VCs will use their company building skills and more capital-efficient models to bridge the gap from company inception to commercialization in spaces in very large end markets like consumer Internet, biopharmaceutical and perhaps consumer wireless, to produce some spectacular winners that may impact the asset class returns. The overall health of the M&A market may palliate the issues with the current IPO market in both technology and life sciences spaces.” – Jean-Francois Formela, Partner, Atlas Venture.

ABOUT REGULATION:

“In light of recent, widely publicized public company board embarrassments, venture capitalists will proactively lead and widely adopt private company director education initiatives. This example of successful self-regulation will set an example for broader private equity board adoption of similar practices.” -Pascal Levensohn, Founder and Managing Director, Levensohn Venture Partners

“In 2007 venture capitalists and their companies will continue to struggle (in) accessing public markets for capital. Excessive regulation of both financial analysts and financial reports is, respectively, limiting coverage of young growth companies and curtailing profits. This combination has virtually shut off such companies from the public capital they need to grow, reducing job creation and increasing trade deficits. Meanwhile our ‘leaders’ in Washington wring their hands and do nothing.” – Robert D. Pavey, General Partner and Managing Partner, Morgenthaler