"My big theme these days is venture capital in transition," said Jessica Canning, director of global research in San Francisco. She reported on venture investment in the first three months of 2008.

Canning cited two transitions. The first is the increasing globalization of early stage finance as the big but backward economies of India and China attract investment. The second trend affects the United States, where medical devices, like catheters to clear blocked blood vessels, and information services such as social networks are gaining ground.

India was the focal point of the report that Canning issued Thursday. She said investors are backing consumer and retail firms that benefit from the rise of the Indian middle class, as well as business services such as printing that cater to the nation's growing economic sector.

Canning said the same pattern holds true in China, which is drawing deals and money focused on startups that expand the country's industrial and consumer base. She said the capital flowing to India and China is designed to expand existing companies. By contrast, venture capital in the United States, Europe and Israel is usually dedicated to backing new technologies or services.

In the United States, Canning said, one noteworthy development has been growth in the medical device industry. In the first quarter of 2008, medical device companies got $866 million to develop new products. She said it was the first time that devicemakers got more money than biopharmaceutical startups, which received $771 million in the first three months of the year.

In 2003, biopharmaceutical companies attracted $3.7 billion in the search for cures, while $1.9 billion went to companies making medical devices, she said.

A similar change in focus can be seen in the high-tech sector, where money is flowing to information services such as social-networking sites. Canning contrasted information service firms, like Google, with traditional software sold for work or play by firms like Oracle or Electronic Arts.

In the first quarter of 2008, information services attracted $1.6 billion in venture cash, for the first time eclipsing the $1.2 billion invested in software. Again Canning went back to 2003 to show the change. In that year, information services attracted just $977 million, while $4.7 billion flowed into software startups.

The Dow Jones report found venture investing strong in Europe and Israel. Mark Heesen, president of the National Venture Capital Association, said Germany and Spain are top destinations for startup cash as leaders in green technology. "It's an unusual situation where U.S. firms are playing catch-up in green tech," Heesen said.

Meanwhile, despite its size and political situation, Israel continues to draw an impressive share of startup dollars because of its intellectual talent.

"If Silicon Valley could be replicated anywhere else in the world, Israel would be the place to do it," Heesen said.

Where capital is going

Startup deals and dollars in the first three months of 2008.

	Deals	Amount*
U.S.	603	$6,835
Europe	180	1,539
China	39	719
Israel	55	572
India	16	99

*in millions