As the software industry continues its rapid evolution, the financial deals that fuel investor interest in the industry continue to show strong levels of activity.

More than 900 software companies received $5.3 venture funding in 2007, a slight increase over 2006, according to the MoneyTree report. Fully 44 percent of that investment was funneled into later stage companies, a big jump from the 36 percent level in 2005. And 67 seed financing deals were recorded with an average funding round of $3.1 million. Automated Trading Desk received $60 million, making it the largest software VC deal of the year. Sigma Partners funded 26 software startups which ranked the firm no. 1 in terms of venture capitalists backing software companies (see VC charts below.)

The software M&A sector remained extremely active. According to Thomson Financial, 2007 witnessed nearly $45 billion-worth of software deals. The total is more than four-times that of 2002 activity. At the same time, technology LBOs remained a significant force in 2007 with $79.2 billion of deals (see M&A and LBO charts below).