Venture capital investment outside the U.S. increased in 2008 even though deal making in American firms declined, reported Wednesday.

Investors made 1,416 deals in Europe, Israel, mainland China and India that totaled $13.4 billion last year. The total is a 5 percent increase from 2007.

Meanwhile, U.S. venture deals declined to $28.3 billion across 2,550 deals in 2008 from $30.9 billion the previous year.

The overseas deal-making did decline sharply in the fourth quarter as the global financial crisis worsened. Deals totaling $2.18 billion were made the final three months of the year, a 24 percent drop from the third quarter.

However, for the year, deals done in China, India and Israel reached record highs.

Energy deals helped drive the market.

“The venture capital industry continues to rapidly globalize as investors are eager to find and tap new areas of innovation, especially in emerging economies like China and India,” said Jessica Canning, director of Global Research for Dow Jones VentureSource. “What’s most notable is that the growth in international investment is not being fueled solely by information technology (IT), which is traditionally the sweet spot for venture capitalists, but also by energy-related investments. Investments in energy totaled nearly $1.4 billion in 2008 and now account for more than 10% of international venture investment. Much of this can be attributed to the global spike in energy prices we saw in 2008 and the venture community’s championing of renewable and clean energy technologies.

Overview by Region/Country

In Europe, deal making fell 15 percent to $6.5 billion. In the fourth quarter, investments fell to $1.3 billion, the lowest total in four years.

IT deals fell to $2.5 billion from $3.4 billion in 2007. Healthcare investments dropped to $1.8 billion from almost $2.5 billion the previous year.

However, energy and utility deals soared 89 percent to $816 million.

Interestingly, the median deal amount did set a record at $4 million.

China, Israel and India all set records for venture deals.

In China, investors made 245 deals worth $4.2 billion, up from $2.8 billion and 290 deals in 2007. Median deal size increased to $10 million – a record.

IT investments climbed 60 percent to $1.6 billion, and consumer service deals jumped 57 percent to $1 billion.

In Israel, investors made 210 deals totaling $1.9 billion. The mean deal size reached $5 million.

Nearly 70 percent of the investments, or $1.3 billion, were made in IT.

Across India, 80 deals produced $864 million, up from $842 million in 2007. Financial services produced $368 million across 26 deals, more than double the $144 million placed in 20 deals in 2007.

IT deals did plunge, however, to $176 million in 22 deals from $319 million and 32 deals a year before.

Indian median deal size was $8 million, the same as in 2007.