Fueled by investments in software, biotechnology and the Internet, U.S. venture capitalists spent $29.4 billion in 2007, beating their totals from each of the previous five years, according to a MoneyTree Report that will be issued Monday.

Investments topped $40 billion in 2001 before dropping sharply to $21.9 billion the next year. After another small decline in 2003, venture capital investments have risen steadily each year according to the report issued by PricewaterhouseCoopers and the National Venture Capital Association.

The $29.4 billion spent in 2007 was 11% more than the previous year, while the 3,813 deals in ’07 were 5% more than in 2006. Investments were spread evenly throughout 2007, with at least $7 billion in each quarter.

Software and biotech led the way among industries in 2007, with about $5.2 billion invested in each.

“Software-as-a-service is a big trend. Open source companies are doing very well,” said investor Deepak Kamra of Canaan Partners in a conference call announcing the results. “We think those two sectors will continue to do well.”

Some of the sharpest growth occurred in clean technology, which saw $2.2 billion invested in 2007 compared to $1.5 billion the prior year. Life sciences – including biotechnology and medical devices - got $9.1 billion, up from $7.6 billion the previous year.

Telecommunications spending declined from $2.6 billion in 2006 to $2.1 billion in ’07.

Software and telecom accounted for about half of the $14.3 billion spent on IT in 2007. The balance of IT spending went mostly to media and entertainment, semiconductors, IT services, networking and equipment, and electronics and instrumentation.

Internet-specific spending has risen steadily, from $2.8 billion in 2004 to $4.6 billion last year. “There’s a lot going on in digital media and the Internet space. New business models [like social networks] are proliferating,” Kamra says. “These companies don’t need as much capital in the Internet world, so they can get started cheaper, and that’s why there are so many of them.”

With the exception of software-as-a-service and open source, Kamra predicted software investments might stay flat or drop slightly in 2008.