Venture capital investments are getting hot with $32 billion estimated to have been invested, according to a global yearend analysis by Dow Jones VentureOne and Ernst & Young. The report notes remarkable early-stage activity in 2006. Of the completed rounds in Europe in 2006, for instance, 42 percent were seed and first rounds. In the United States, 36 percent of the rounds were seed and first rounds. This points to VCs going past their existing portfolios and possibly seeing increasing potential in emerging areas and technologies.

Asia, particularly China and India, are viewed as the most attractive destinations by venture firms, according to Michael Scown, managing director of Intel Capital, at India Semiconductor Association's 2007 Vision Summit in Hyderabad.

That trend is borne out by recent investments by other technology-focused VC firms. For instance, Xilinx Inc. announced last November it had set up its Asia-Pacific Technology Fund with $75 million. According to Stacy Fender, managing director of Xilinx Asia-Pacific, the increasing amount of electronics design work done in the Asia-Pacific made this the right time to look for new investment opportunities to accelerate the adoption of system-level programmable technologies across the region.

Xilinx is not alone in that line of thinking. Nokia Growth Partners just last month announced an additional $100 million investment into a Fund of Funds program with a special focus on emerging technology markets, including India and China.

The Nokia Growth Partners inaugural $100 million Venture Capital Fund was launched in 2004 to invest directly into growth-stage technology companies that share an alignment of business interests with Nokia. The Fund of Funds program provides an additional $100 million in top-tier venture funds that offer access to emerging markets and/or exposure to innovative technologies.

Scown views India at par with or ahead of China in terms of attractiveness to VC firms. The $515 million invested in 92 deals represents a 74 percent growth year-on-year for India. According to Bob Kondamoori, managing director of Sandalwood Partners, India's capital-efficient business models and huge domestic market with a growing per capita GDP are enticing enough. Top that with about 215,000 engineers graduating annually, $624 million in revenue from its young IC design industry and a rapidly growing domestic IC market of $1.2 billion, and you have a compelling argument for VCs to invest.

Cutting across borders, VCs are enthusiastic about emerging industries like "clean technologies" and Web 2.0. An analysis by VentureOne and Ernst & Young found that $761.4 million was invested in clean technology in the first three quarters of 2006 on a worldwide basis, up 50 percent from $504.1 million invested after the first three quarters of 2005. Areas of focus include energy, water, agriculture, transportation and manufacturing where the technology creates less waste or toxicity. Sandalwood Partners also revealed that it is watching solar energy, fuel cells and biofuels apart from the traditional semiconductor, optics, and systems and software sectors.

With a keen eye on innovation, particularly on environment-friendly technologies, 2007 is expected to see a furious search for engineering developments that VCs can bet on. And with an estimated $158 billion capital under management, the bets are going to be bigger. As Scown puts it, "The world is awash with capital, and you can't unload a dump truck with a teaspoon."

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