The venture-backed initial public offering market saw solid gains in 2006, as the value of such offerings neared $4 billion. And despite a slowdown in the number of VC-backed M&A deals, their total value remained on par with last year, thanks in large part to Google Inc.'s acquisition of YouTube Inc.

There were 56 completed IPOs of VC-backed companies in 2006, which raised a total of $3.7 billion, according to data released by VentureOne, a research unit of Dow Jones & Co., the publisher of this newsletter. That far outstrips 2005's total of 42 IPOs and $2.3 billion raised, though it falls short of 2004's 67 IPOs and $5 billion raised.

There were 18 completed IPOs of venture-backed companies during the fourth quarter of 2006, a healthy jump from the 12 IPOs during the year-earlier period and the highest total since the fourth quarter of 2004, according to VentureOne.

The fourth quarter of 2006 saw $1.2 billion raised from the IPOs of VC-backed companies, compared to $697 million in the fourth quarter of 2005.

The IPO pipeline also saw a boost at the tail end of 2006. Clearwire Corp., BigBand Networks Inc., Orexigen Therapeutics Inc., Glu Mobile Inc. and Aruba Networks Inc. all registered for IPOs between Dec. 15 and Dec. 26.

IT companies saw the greatest gain in terms of the number of IPOs during 2006, with 20 - the highest IT company IPO total since 2000 and nearly twice the 11 completed in 2005. Notable IT company IPOs during 2006 included data storage company Isilon Systems Inc.'s December offering, and health care Web site eHealth Inc.'s October offering.

There were 28 completed health care company IPOs in 2006, up slightly from last year's total of 21 but down from 39 in 2004. Health care company IPOs during 2006 included obesity treatment company Orexigen Therapeutics' and biopharmaceutical company Affymax Inc.'s offerings in December.

While IPO activity was respectable in 2006, venture-backed M&A deal activity lagged. That, however, was offset by a surging individual M&A deal size - notably the $1.65 billion acquisition of YouTube by Google Inc. in October - keeping dollar volume relatively even.

The past year as a whole saw 404 venture-backed M&A deals, versus 407 in 2005, the lowest yearly total since 2003. The fourth quarter of 2006 saw the sharpest decline, with 75 M&A deals - the fewest in any quarter since the first quarter of 1999, when there were 53, according to VentureOne.

But those 75 M&A deals in the fourth quarter were worth some $7.3 billion, outpacing the $5.5 billion value of the 102 deals done in 2005's fourth quarter. A large portion of the fourth quarter 2006 total, of course, was thanks solely to YouTube.

Followed by YouTube, the next largest acquisitions of VC-backed companies during the fourth quarter were the $580 million sale of communications provider Xspedius Communications LLC to Time Warner Telecom Inc., and the $417 million sale of mobile messaging company Mobile 365 Inc. to Sybase Inc.

By market sector, there were 273 M&A deals in IT markets in 2006, and 74 in health care - a proportion roughly equivalent with past years.