As the nation's energy crunch lingers on, small businesses in search of venture capital are finding it's a good time to be green.

The money invested in North American companies producing green technology rose 35% in 2005, to a total of $1.6 billion, according to a new report by the Cleantech Venture Network.

In the fourth quarter of 2005 alone, green technologies, or "cleantech, made up 10% of all North American venture capital investment, totaling $502 million -- an 18% increase from the previous quarter.

"If you go back and look at the history of growth of emerging technology, like nanotechnology, cleantech is similar, said Craig Cuddeback, senior vice president of Cleantech Capital Group, an Ann Arbor, Mich.-based firm that organizes the Cleantech Venture Network. "But cleantech is broader than that. All the major energy companies are playing in this space now.

Crediting an increased national awareness for cleantech -- which includes industries such as alternative energy, nanotechnology, water purification, air quality, and agricultural methods -- Cuddeback predicted that the recent strong growth may be part of a coming investment stampede in environmentally sound companies.

Although the report indicates that most of the "clean companies attracting venture capital still hail from the energy industry -- 35.6% of the total money invested -- large investments were also made in companies specializing in green materials and nanotechnology used in industrial and consumer electronics.

"If people take the word 'clean' too seriously or too literally, they will miss a whole slew of opportunities, said Rodrigo Prudencio, principal at Nth Power, a San Francisco-based venture-capital firm focused on the energy industry. Prudencio pointed out that clean technology as a concept includes anything that efficiently uses energy. His firm closely watches small businesses devising nanotechnology and material electronic innovations, which can be found in everything from electrical plants to cell phones.

"We're very focused on small companies that will move faster than large companies with these solutions, Prudencio said.

Proven venture firms like Kleiner Perkins Caufield & Byers, which gained notoriety for funding Internet boom standouts like Google and Amazon, are moving fast to snatch up clean and green innovators. The Menlo Park, Calif.-based venture-capital powerhouse announced in February the creation of a $100 million fund for backing green technology companies.

Cuddeback predicts the growth in green technology investment will continue to skyrocket. Cleantech Venture Network projects that North American green technology companies will require $3.4 billion in capital backing between 2006 and 2009.