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By Russell Garland, VentureWire 

The technology bubble popped years ago, but the downsizing of the venture industry continues.

There were 844 venture firms investing in U.S. companies last year, 40 fewer than in 2006, according to the latest data from VentureSource, a research unit of VentureWire publisher Dow Jones. That is down 30% from the bubble year of 2000, when there were nearly 1,200 active investors.

The total includes a substantial number of firms–224, or 27% of the total–who didn’t back any new companies last year, an indication that the ranks of active investors will continue to thin. The list of firms who made only follow-on investments last year contains some well-known players who have disbanded, such as St. Paul Venture Capital, or who have dropped plans for a new fund, such as Worldview Technology Partners, along with small firms who have not raised a new fund in years.

The National Venture Capital Association is starting to see member firms drop out because they aren’t raising another fund, according the President Mark Heesen. “We are finally seeing what in our view is the beginning of the impact of the bubble,” Heesen said. Venture funds typically have a life of at least a decade and firms can soldier on long after they have run out of capital to back new companies.

While he declined to predict the effect on the NVCA’s membership, Heesen said he foresees a 15% decline in the next two years in the total number of venture firms investing in the U.S., many of them too small to meet the NVCA’s membership threshold of $5 million under management. The NVCA has about 470 member firms representing 90% of the venture capital under management in the U.S.,

Many of the active investors in 2007 did only a few deals. Less than half–45%–completed four or more investments. And 29% made just one investment. About 550 firms have made at least one investment in a U.S. company this year, according to VentureSource.