"There's a lot of money out there. It's just highly constipated," joked Thomas Rosch, general partner with InterWest Partners.
Rosch was one of several panelists at the annual VentureOne Summit in San Francisco Tuesday, which gathered a roundtable of venture capitalists and executives from chip-related companies to discuss investment trends in the semiconductor industry.
Last year,fell 48 percent to $11.7 billion, according to VentureOne, a venture research firm.
Nonetheless, the panelists noted that they are still finding worthwhile companies to invest in.
"In the last five years, we have started looking at a category called 'other.' That would be areas like power management, batteries and new wireless areas like 802.15.3 (ultrawideband)," Rosch noted.
Applied Materials Ventures, meanwhile, is interested in components for cell phones, Ethernet LAN (local-area network), optical components for Ethernet and the next generation of wireless chips for LAN, said Julien Nguyen, managing director.
"We're also looking for companies that offer new materials for silicon, like RF (radio frequency) applications and memory applications," Nguyen added.
Other venture capitalists described their investment strategy in broader terms.
"We're looking for investments that will change the customer's end product. Something that causes a company's customer to offer new services or new architects, rather than just improve their price and performance," said Jim Smith, a principle with Mohr Davidow Ventures, and panel moderator.
Security is capturing a lot of investment dollars, given the amount of innovation that is occurring at the applications level, he said.
And roundtable panelist Dado Banatao, managing partner with Tallwood Venture Capital, said his firm is interested in companies that offer "horizontal" technology.
"We're looking for new technologies that can be applied to many different systems," Banatao said, such as analog and mixed signal designs.