NEW YORK (CNN/Money) – Tech stocks had a second straight winning year in 2004 and the IPO market came back with a vengeance.

So it shouldn't be a big surprise that venture capitalists, eager to find the proverbial Next Big Thing, were also stepping up their pace of investments in private companies.

Venture capitalists invested more than $20 billion last year, according to preliminary data from PricewaterhouseCoopers (PwC). That's up slightly from $18.7 billion in funding in 2003.

And the VCs have certainly been investing in companies with some odd (to put it kindly) ideas.

According to PwC, one VC firm invested $515,000 in a company called SpongeTech. The firm, which is not headquartered in a pineapple under the sea, has developed a sponge that comes with soap inside. I've been waiting for my whole life for that!

Then there's OnTech, which makes a coffee cup that heats itself. Contain your excitement. Two firms invested $5 million in OnTech.

And three VC firms poured a total of $6.7 million into In-Touch Health, which makes robots that can make hospital rounds for busy doctors. Fear not though. Actual human physicians control the robots remotely. There's obviously some merit here but it still sounds like a sci-fi nightmare waiting to happen if you ask me.

So it looks like the dollars are flowing for start-ups again and that should continue in 2005. Tracy Lefteroff, global managing partner of venture capital practice and private equity at PwC, said that VC funding should be between $20 billion and $30 billion this year.

Where will much of this money go?

Network security companies are likely to attract a fair amount of attention, said William Dunbar, a managing director with Core Capital Partners, a Washington, D.C.-based VC firm focusing on early-stage companies primarily in the Northeast.

Dunbar adds that VCs will be looking beyond companies with anti-virus and anti-spam products to protect computers. Core Capital has invested in a company called Trust Digital, which makes security software for mobile wireless devices like cell phones and personal digital assistants.

Wireless is expected to be another hot area. In fact, cell phone industry leader Nokia (Research) announced last month that it was starting a new $100 million venture capital fund called Nokia Growth Partners that will look to invest in mid-to-late stage companies. Nokia already has another fund that focuses on younger companies.

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Rob Trice, a general partner with Nokia Growth Partners, said that Nokia wouldn't limit itself to investing in wireless companies but that it is seeing plenty of opportunities there after a rough couple of years.

"We're looking at companies that have made it through the cold, hard winter in telecom. We're starting to see the elbow in the hockey stick in mobility," he said.

Consumer electronics should also be a place where VCs will be looking to invest particularly on the equipment side. The success of Apple's (Research) iPod and other digital media devices clearly has caught the attention of the VC community, said Steve Bird, a general partner with Focus Ventures, a late-stage firm based in Palo Alto, Calif.

In the hopes of capitalizing on this trend, Bird said his firm has invested in a company called Silicon Optix, which makes digital processors for high-end televisions.

And of course, the Internet is back. Google's blockbuster IPO was just one of many hot Internet offerings in 2004. But Lefteroff said that VCs are probably going to be more cautious than they were in the late 1990s.

A big reason behind Google's (Research) success, after all, is that is already highly profitable.

"The Internet is going to be clearly a place of interest since there are opportunities to make money there. But the bar has been raised so you can't just have a neat idea anymore and expect to do well," Lefteroff said.

In addition, the very nature of venture capital investing is to look ahead, not back. So VCs looking for companies to challenge Google might be wasting their time.

"We're concerned about what the market is going to be doing three, five and seven years out," said Tom Blaisdell, a general partner with Doll Capital Management, a Menlo Park, Calif.-based VC firm. "Usually with what's hot, it's too late to make new investments. You've missed the boat and it's harder to find real value."

That's something the average investor should keep in mind this year now that Internet stocks have come roaring back.

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