New data show that the long-predicted squeeze in very early stage investments may be upon us. The MoneyTree Report by PricewaterhouseCoopers LLP and the National Venture Capital Association, based on data from Thomson Reuters, analyzes the amount of money venture capitalists put into companies at different stages, in different geographies and in various industries. While the overall amount venture capitalists put to work in 2011 was dramatically higher than in 2010, the amount invested into seed-stage deals was much lower.

Venture capitalists have been favoring later stage – and therefore supposedly less risky—investments for some time. This year, those deals got markedly bigger. The biggest was Dropbox, which raised $250 million at a valuation of $4 billion.

VCs invested $28.4 billion into 3,673 deals in 2011, representing a 22% increase in dollars but only a four percent increase in the number of companies that got them. That, of course, is indicative of a larger average deal size, and of the later-stage companies that are successfully getting funded. In the fourth quarter alone, VCs put $6.6 billion into 844 companies, down from $7.3 billion in the third quarter and 953 deals. The annual total is the third-highest in ten years.

What bubble?

Mark Heesen, president of the NVCA, brushed aside talk of a bubble, saying that venture capitalists are “acting prudently and not chasing excessive valuations.” Investments in clean technology and internet companies grew particularly quickly, but Heesen says, “we’re unlikely to see these sectors overheat like we say in the 1999 to 2000 era.”

Consumer-related Internet investing had an especially strong year, and continues to show impressive momentum, says Debby Harrington, founder and General Partner of New York-based venture firm Starvest Partners. Part of the appeal, she says, is that companies such as Living Social, Groupon, and Twitter are either going public or are ready to do so about three to five years after launch. That compares to a more typical timeframe of seven years or more for most software companies. The contrast, she says, has VC’s “really salivating over large liquidity events in a relatively short time.” Within e-commerce, social, local and mobile – or SoLoMo – continue to be the big trends.

Heesen says some of the later-stage funding was driven by the difficult market for venture-backed companies. As it remains tough to find buyers – either public or private – for many portfolio companies, VCs find themselves pumping more money into these companies for longer than they might first have expected.

Meanwhile, companies in search of seed-stage funding were less likely to find it from venture capitalists. The amount of money going into seed-stage deals, at $919 million, was down 48% from 2010. In the fourth quarter, venture capitalists invested $134 million in seed-stage companies, down 40% from the third quarter.

New York slinks back to third

In the third quarter of 2010, New York edged past Boston as the region with the second-most venture capital investment (Silicon Valley remained first, by a long shot). But the fourth-quarter and year-end numbers seem to indicate that New York’s strong showing may have been a bit of a fluke. In the fourth quarter of 2011, venture capitalists put about $777 million to work in New England-based companies, compared to just $545 million in New York. The full-year numbers tell a similar tale: $3.2 billion for New England compared to $2.7 billion for New York.