Investments rose 15 percent in the second quarter of 2009, with IT earning the most VC dollars. But funding remains significantly low compared to previous years.Venture investments in technology went up 15 percent in the second quarter of 2009 compared to the first quarter, rising to $3.7 billion from $3.2 billion.

IT garnered the most investment, with a total of $1.7 billion. Software led within the IT category, taking just over $644 million. IT services was a distant second at $295.1 million.

Life sciences attracted $1.5 billion in investments, with biotech and medical equipment the leading sectors in the category.

PricewaterhouseCoopers and the National Venture Capital Association announced these numbers on Tuesday, using data from Thomson Reuters.

While the increase in venture activity is welcome news during a long recession, funding is still down significantly compared to the last three years. Total second-quarter investments ranged from $7.1 to $7.6 billion since 2006.

LITTLE HOPE FOR THE IPO HORIZON One reason for the lower numbers is a dismal IPO market. Ray Rothrock, a partner at VC firm Venrock, says that when startups don't have a clear exit, VCs have to keep funding existing investments, leaving less cash to invest in new companies.

The numbers bear him out. Of the 612 deals done in the second quarter, only 141 were first-time investments, compared to 333 in Q2 2008 and 364 in Q2 2007.

Rothrock says the firm, which has a large portfolio in IT, isn't funding startups with an eye towards acquisition. "We try to back companies that have teams and markets that can be an IPO. If a company gets acquired in the meantime that's OK, but it's hard to do an investment in a fund like ours that you don't think it can be an IPO."

By contrast, David Jones, chairman and managing director at Chrysalis Ventures, says acquisitions play a major role in exit opportunities. Jones currently focuses on the healthcare market.

"As I look at the world, I think we still need to plan on selling our companies to those with capital," he says. "We desperately need an IPO market to come back at some point, but we don't see it yet."

IT HOTSPOTS When asked what's driving investments in IT these days, Rothrock says the company looks for technologies that help make enterprises more efficient, both from a cost and operational perspective. "Virtual everything-desktops, servers, things to reduce hardware devices and power management," says Rothrock. "This is a classic, hard-ROI justification." SaaS also falls into the efficiency category. In addition, security remains a compelling area, though these days it comes with a strong compliance angle.