Venture-capital investment in IT declined slightly in the first quarter of 2005. At $2.6 billion, it was just under the $2.7 billion invested in the fourth quarter of 2004, according to the MoneyTree survey released Tuesday by PricewaterhouseCoopers, Thomson Venture Economics, and the National Venture Capital Association.

Overall VC investment was $4.6 billion in the first quarter, down from $5.4 billion in the fourth quarter of 2004. VC investment has stabilized at between $4 billion and $6 billion per quarter for the past three years, after falling from the stratospheric levels of the dot-com boom, when VC investment topped $20 billion per quarter.

Software companies drew $1.1 billion in VC investment in the first quarter of 2005, down from $1.3 billion in the previous quarter. Biotechnology, the next highest category, drew $632 million, down from $1.2 billion in the fourth quarter. Software also led in the number of VC deals at 198, versus 68 for biotech.

Semiconductors were at $375 million, down from $520 million in the fourth quarter.

Several IT categories posted gains: telecommunications ($371 million, up from $325 million in the fourth quarter), IT services ($302 million, up from $192 million in the fourth quarter), networking and equipment ($347 million, up from $322 million in the fourth quarter), and computers and peripherals ($109 million, up from $81 million in the fourth quarter).

Despite some sluggish numbers, the outlook for IT investments remains encouraging, said Tom Crotty, general partner of Battery Ventures, in a conference call. "I think we're in a stable environment, which is a good thing after the roller-coaster ride of 1999 through 2003."

First-time financings were up in several IT categories in the first quarter, including software ($357 million, up from $307 million in the fourth quarter), and IT services ($171 million, up from $54 million in the fourth quarter).

Crotty said the increase in first-time financings reflects a need by VC firms to seek "white space"--mature companies that have succeeded without the need for venture capital.