Venture capitalists invested $205 million in 24 local startup companies last quarter, bringing total investments on the year to $1.2 billion and San Diego’s ranking up from 13th to 9th just behind Los Angeles/Orange County, which raised $279.7 million last quarter. Topping the list was Silicon Valley at $1.96 billion.

However, San Diego’s quarter was way down from the $434 million invested in the last three months of 2007. For the year, San Diego companies fetched 39 percent less than the $2 billion received in 2007.

Nationally, VC investment fell 8 percent in the fourth quarter compared to the third quarter and 26 percent from the fourth quarter of 2007.

San Diego’s life sciences sector led investments in the quarter with $74 million, followed by the industrial/energy sector, which received $42 million, and networking and equipment sectors, which received $27 million.

Of the total funds invested, 36 percent went to startups and early stage companies — an increase from 27 percent in the previous quarter. Expansion stage companies received 17 percent of invested capital, compared to 4 percent in the third quarter. And later stage companies saw investments fall.

The strong showing by early stage companies surprised the report’s authors, who concluded that investors are taking advantage of lower valuations.

The top five deals, which accounted for more than 50 percent of investments, were: Luxtera, a fabless semiconductor maker, with $26.75 million; Fallbrook Technologies, which makes the NuVinci transmission, with $25.4 million; Staccato Communications, a wireless technology company, with $20 million; and two biopharmaceutical firms, Anaphore with $17 million, and Calixa Therapeutics with $15.1 million.

— Ned Randolph