Cyber Week Sale! 50% Off All Access

What Venture Capitalists Are Investing in Right Now A look at what's hot and what's not, when it comes to the industries attracting the most funding.

By Catherine Clifford

Opinions expressed by Entrepreneur contributors are their own.

What VCs are Investing In Right Now
Image courtesy of Shutterstock.com

When you are looking to raise venture capital for your startup, you will likely have a better chance if you are in an industry that VCs are hot to invest in. Right now, that means mobile technology, cloud-computing technology, and social computing companies, according to the most recent MoneyTree Report from PricewaterhouseCoopers and the National Venture Capital Association.

These types of tech startups have a number of advantages from the investor perspective: they can reach a lot of customers, industry regulation is relatively minimal, and they are relevant, says Mark Cannice, professor of entrepreneurship with the University of San Francisco School of Management.

Also attractive to investors, mobile, social, and cloud technology startups don't require very much money to get off the ground. On the other hand, a clean technology startup, for example, often requires quite a bit of money to launch: Solar panels and wind turbines are much more expensive to manufacture than an app for your iPhone.

Related: Six Mistakes Entrepreneurs Make When Seeking Venture Capital

The software industry saw $2.3 billion worth of investment in the second quarter of this year, more than any other industry, according to the MoneyTree report. And Internet-specific companies, meaning companies across industries whose business model is dependent on the Internet, received $1.8 billion in venture-backed investment in the second quarter.

Meanwhile, as tech companies continue to attract investor attention, entrepreneurs innovating life science technologies, clean technology, and medical devices appear to be getting the cold shoulder.

In the life sciences industry (a combination of biotechnology and medical devices and equipment), venture-backed investment declined for the fourth consecutive quarter, pulling in only $1.4 billion in the second quarter of 2012, the MoneyTree report shows.

Related: 9 Things Startups Must Know Before Approaching Lenders

"A big reason is that it costs so much money and it takes so long for a biotechnology company, in particular, to go from an idea to a drug," says Mark Heesen, the president of the National Venture Capital Association.

Furthermore, life science companies have to deal with a heavy load of regulation from government agencies, like the Food and Drug Administration, which make products costly to launch. And, as very competitive research and production facilities develop in Europe and Asia, where there is not the same level of government regulation, "it is becoming a little bit more difficult to work in that space" for entrepreneurs here in the U.S., says Heesen.

Also, medical device investments are suffering in the face of strict regulations and government policy uncertainty, according to comments from VCs collected by Cannice in his second quarter Silicon Valley Venture Capitalist Confidence Index.

However, investors are still relatively confident in healthcare internet technology startups, according to a separate study measuring VC confidence from the National Venture Capital Association and financial services giant Deloitte released earlier this month.

Related: The Fiscal Cliff: 3 Tax Changes You Need to Know Are Coming

Venture capitalists are investing in the companies today that they are confident will grow quickly and make money, not companies that might get bogged down in expensive research and development or burdensome regulation. "If you look at the end game and the end game is becoming more difficult, then you are less likely to get involved in the beginning," says Cannice.

What type of startups do you think VCs should be investing in right now? Leave a comment below.

Catherine Clifford

Senior Entrepreneurship Writer at CNBC

Catherine Clifford is senior entrepreneurship writer at CNBC. She was formerly a senior writer at Entrepreneur.com, the small business reporter at CNNMoney and an assistant in the New York bureau for CNN. Clifford attended Columbia University where she earned a bachelor's degree. She lives in Brooklyn, N.Y. You can follow her on Twitter at @CatClifford.

Want to be an Entrepreneur Leadership Network contributor? Apply now to join.

Side Hustle

'I Just Hustled': She Earned More Than $300,000 Wrapping Gifts Last Year — and It All Started With a Side Hustle

When Michelle Hensley lost her husband to cancer, she needed to figure out how to earn an income for her family.

Growing a Business

This Breakthrough Technology is Poised to Accelerate Your Company's Growth

Discover a breakthrough technology stacked on top of generative AI, now poised to revolutionize businesses across nearly every sector. Unlock unprecedented growth and profitability potential, achieving levels once thought unattainable.

Business Ideas

63 Small Business Ideas to Start in 2024

We put together a list of the best, most profitable small business ideas for entrepreneurs to pursue in 2024.

Science & Technology

You Have 1 Month Left to Prepare for These 5 AI-Powered Marketing Changes — Act Now Before It's Too Late.

Big changes in 2025 will redefine marketing as AI evolves rapidly, offering growth opportunities but also risks. Learn how to stay ahead in this week's video, covering new search platforms and avoiding over-automation.

Business News

Google CEO Sundar Pichai Says 'You'll Be Surprised' By How Google Search Changes Next Year

AI has already changed the look of search, but Google's CEO says there are more changes to come.