Even though venture capital investment in L.A. County firms tapered off in the fourth quarter, the county still managed to post its best year for investment since 2000.

According to data released Monday from Ernst & Young LLP, there were 16 venture capital investment deals in L.A. County firms in the fourth quarter totaling $226 million. That’s down from 27 investment deals in the third quarter worth $284 million, though the dollar volume is up from the fourth quarter of 2005, when there were 19 deals worth $148 million.

But 2006 turned out to be a strong year for venture capital investments in L.A. firms, with 98 deals totaling $1.26 billion. That’s much higher than 2005’s 86 deals worth $884 million and represents the highest level of activity since the dot-com bubble in 2000, when there were an astounding 283 deals worth $4.21 billion.

“It was a very healthy year in the U.S. overall for venture capital investment and particularly so here in Los Angeles,” said Michael Schoenfeld, leader of the Venture Capital Advisory Group for the Pacific southwest region and a partner with Ernst & Young.

Venture capital investment was up nationwide in 2006 because of the boom in private equity activity and initial public offerings, both of which provide quick exit strategies for venture capital investors, Schoenfeld said. Los Angeles County also benefited because of the “tremendous interest in the entertainment, communications and information services sectors.”

Indeed, Los Angeles County surpassed San Diego County to become the second-biggest recipient of venture fund investment dollars in the country. The Bay Area was the biggest, Schoenfeld said.

Among the major deals in the fourth quarter was a $45 million later stage investment from a team led by HealthCare Ventures in Monrovia-based Xencor Inc., a provider of protein and antibody therapeutics.

Almost as large was a $40 million second round investment by Allen & Co. and Battery Ventures in Los Angeles-based Spot Runner, which provides web-based services for personalized television ads.

Schoenfeld said he expects venture capital investment in L.A. area companies to remain strong well into 2007. He noted that several deals closed in the final weeks of 2006 and that the hot IPO market should spur more investment. “As long as the exit strategies for VC investors remains strong, we should see robust levels of investment,” he said.